BRSL

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 8 a.m. ET Senior Vice President of Investor Relations - James Hurley Chief Executive Officer - Vincent Sadusky Chief Financial Officer - Massimiliano Chiara Operator: Hello, everyone. Thank you for joining us and welcome to the Brightstar Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Jim Hurley, Senior Vice President of Investor Relations. Jim, please go ahead. James Hurley: Thank you. And thank you, all, for joining us on Brightstar Lottery's Second Quarter 2026 Conference Call, which is being hosted by Vince Sadusky, our Chief Executive Officer; and Max Chiara, our Chief Financial Officer. After some prepared remarks, Vince and Max will be available for your questions. We are presenting from multiple locations today and would appreciate your patience if we encounter any technical difficulties. 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'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, August 4, and we have no obligation to update any forward-looking statements we make. And now I'll turn the call over to Vince. Vincent Sadusky: Thank you, all, for joining us. Our better-than-expected Q2 profits were driven by an increase in global same-store sales and strong cost discipline even as we continue to invest in high return initiatives. We generated significant cash in the first half of the year, which not only helped to fund the final Italy Lotto license payment in Q2, but also the $140 million of capital returned to shareholders in the year-to-date period, all while continuing to maintain a solid balance sheet. We executed well against our strategic priorities in the first half of the year and expect this good progress to deliver stronger revenue and profit growth in the second half of the year. Global same-store sales increased 1.5% in the second quarter, a slight acceleration from Q1's performance on stronger U.S. sales. The improvement in U.S. sales primarily came from stronger multistate jackpot performance and, to a lesser extent, better instant and draw game sales. Some of the strongest growth in instant and draw games came from New Jersey and Indiana markets where we have more direct involvement with day-to-day lottery operations. We've expanded retail points of sale and strategically deployed vending machines and digital signage, all proven initiatives that are delivering encouraging results. We intend to scale these initiatives across the broader portfolio over the next several quarters. Italy same-store sales growth was fueled by instant tickets, including the relaunch of multiplier games, this year's featured summer bundle and the continued success of the new EUR 30 game. Recent multiyear extensions with the Oregon and Washington state lotteries have improved the long-term visibility we have for our business. iLottery continues to be an area of substantial growth. Wagers were up 22% in the first half of the year. In Italy, 23% iLottery growth was led by eInstants, especially the EUR 30 and multiplier games. The 29% iLottery growth in the U.S. included strong expansion in Kentucky and Georgia and the excellent performance of our eInstants content in Michigan and Virginia. We've achieved several milestones with our Italy B2C expansion efforts. At the end of April, we launched a significantly enhanced MyLotteries play app featuring a full range of digital gaming options across eInstants, eDraw, iCasino and sports betting. It also includes new bonusing and loyalty programs in addition to live chat capabilities. It is a best-in-class offer with a compelling user experience. We recently completed the upgrade of retail point-of-sale terminals at over 33,000 locations throughout Italy. The new terminals have much faster processing capabilities, which should improve sales velocity during peak play time and support future game innovation initiatives. The retail network is a strategic asset we intend to leverage to drive digital adoption and traffic to the MyLotteries play app. To date, we've recruited about 23,000 retailers to help drive digital account activation. Their player engagement efforts begin this month and go into September. We've also had important developments in emerging markets. In Sao Paulo, we are live with digital lottery operations. Our team was able to deploy the network just 6 months after executing our 15-year concession. The opportunity ahead is substantial. With 46 million residents and approximately 1/3 of Brazil's gross domestic product, Sao Paulo is the country's largest and most prosperous state. The successful launch of digital operations establishes the foundation for an entirely new lottery operation we are building from the ground up. The launch of retail lottery operations is planned for later this year. We believe Sao Paulo has the potential to be a significant long-term growth opportunity for our business. Instant ticket printing has been another area of focus and investment, including a new press that went live a year ago. The incremental capacity has supported a double-digit increase in standard units produced in the first 6 months of the year, including good growth with customers in Texas, France and Poland. Our innovative GLEAM and Infinity games are important drivers of this higher production volume. In addition, we secured multiyear FM contract extensions in Mauritius and Slovakia building on our decades-long relationships with both. The first half of the year was defined by meaningful progress on foundational initiatives. Much of that work has been investment-led and, as expected, has not yet delivered significant revenue or profit contribution. Looking ahead, we expect that equation to shift. Revenue, profit and cash flow are poised to inflect as these initiatives begin contributing more meaningfully. While some will scale faster than others, each supports the strong annual free cash flow we expect to generate once we move beyond the current peak CapEx cycle. We estimate Brightstar can deliver more than $400 million in annual free cash flow before upfront license payments and after minority distributions. That expected cash generation reinforces our commitment to growing shareholder returns. This cash flow outlook also highlights Brightstar's compelling current valuation representing about a 20% cash flow yield while our dividend yield is approximately 9%. Noncash service revenue amortization impacts adjusted EPS by approximately $0.94 this year, which more than covers the current annual dividend. The remaining EPS provides ample capacity to maintain or potentially grow shareholder returns. Adjusted EPS, excluding service revenue amortization, provides another attractive view on valuation. Based on the 2025 actuals, Brightstar is trading at just 7x that metric. Altogether, the Brightstar story is straightforward. The heaviest investment period is largely behind us. Our growth initiatives are in place and beginning to scale and the market has not fully reflected or priced this inflection point. With that, I'll turn the call over to Max. Massimiliano Chiara: Thank you, Vince, and hello to everyone joining us on the call today. Brightstar delivered second quarter revenue that was in line with expectations and profit that was better than expected. This drove very strong cash generation that was used to fund important investments in growth and shareholder returns. In the first 6 months of the year, we have laid the foundation for accelerated top line and profit expansion. Second quarter revenue was $584 million as reported. Excluding the service revenue amortization increase of $47 million, revenue was flat year-to-year as reported improving to 2% growth net of the U.K. transition, which is an important metric to focus on going forward as I'll explain in a second. Wager-based revenue was in line with the prior year at constant currency. Global same-store sales growth and favorable mix in the U.S. was offset by the impact of the U.K. transition. The second quarter was the last full quarter of year-to-year comparison of the U.K. transition. There will be only about a month's worth of impact in the third quarter. Other service revenue increased 5% year-over-year. I'd like to point out that much of the growth from our Italy B2C expansion effort will be categorized as other service revenue. This includes items like digital distribution of revenue earned on iCasino and sports betting wagering on MyLotteries play app and other B2C services we may add to round out our retailer services offering in the future. Product sales were down $8 million compared to last year when we had elevated hardware sales in multiple jurisdictions. Product sales are naturally lumpy and we expect a much more meaningful contribution from product sales in the second half of the year. As an example, we expect a 2 percentage point incremental impact on growth coming from product sales in Q3 on top of the current same-store sales run rate performance. Second quarter adjusted EBITDA was up 4% to $286 million, which was better than expected. That translates to a reported EBITDA margin of nearly 49% and 42% excluding upfront license fee amortization, in line with Q1 and better than anticipated. Key drivers were global same-store sales growth, ongoing benefit of our OPtiMa cost savings program and certain expense recoveries. This profit increase was achieved despite the U.K. transition and our continuing investment in growth initiatives across the organization. Second quarter income from operations of $56 million experienced a turnaround from a loss of $60 million in the second quarter of last year despite a $47 million impact from service revenue amortization. This was due primarily to adjusted EBITDA growth, lower restructuring costs compared to last year, FX which is a noncash positive impact from a change in the euro-dollar exchange rate on debt balances at the parent company and a lower tax provision, which reflects both the structural improvements we have made over the last 2 years to optimize our effective tax rate and the benefit from a discrete tax item. Our expected full year 2026 effective tax rate remains in the mid- to 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 '26 cash taxes in the range of around $150 million versus $220 million in the prior year period. Cash generation was strong in the first half of the year funding important investments in future growth and shareholder returns. During the second quarter, we made the final installment of the Lotto license payment. The $1.7 billion payment resulted in year-to-date cash from operations of negative $1.17 billion or a positive $501 million when adjusting for the Lotto payment. While these figures reflect the full license payment, Brightstar is only responsible for 61.5% with our partners responsible for the balance. Capital expenditures totaled $121 million for the second quarter and $232 million for the first 6 months with the Italy Lotto deployment accounting for almost half of the investment. We have returned $140 million to shareholders year-to-date, including cash dividends of $85 million and $55 million in share repurchases, inclusive of a $10 million tranche of buyback activity just concluded. Our LTM cash dividend yield is very attractive at nearly 9%. Year-to-date adjusted EPS was $0.24 as reported, up 20% year-over-year. This figure includes noncash service revenue amortization of $0.47 per share. If we exclude service revenue amortization, adjusted EPS increases to $0.71 in the first half compared to dividends per share paid of $0.46 reflecting a 65% pro forma payout ratio. Noncash service revenue amortization is estimated to have a $0.94 impact on full year adjusted EPS, which more than covers the current dividend run rate. I think it is important to provide this additional perspective on our earnings as the service revenue amortization is the way the upfront fee for the new Lotto concession gets treated in our financials for the 9-year duration of the concession, but its cash impact was already fully realized in our net debt figure as of June 30 as we completed the upfront fee payment in the second quarter. Brightstar maintains a strong balance sheet and credit profile. With the final Lotto license payment behind us, net debt leverage of 3.24x is slightly better than our expectations and below our targeted level. And with access to total liquidity of $1.7 billion, we have the flexibility to maintain our balanced capital allocation strategy. This year we are investing $50 million in new market opportunities, strengthening our product and service portfolio and supporting our core business to position Brightstar for durable growth. In Italy, we are hard at work on the expansion of iLottery and digital services where we see significant growth potential over the next several years. We are investing in our technology products and services innovation road map to meet the changing needs of our customers and we are supporting key contract renewals and the development of instant ticket services. In addition to investing in top line growth, we continue to drive organizational efficiency and cost optimization. To that end, we have initiated the third phase of the OPtiMa 3.0 multiyear program, OPtiMa 3.3. With that, we are accelerating and upgrading our OPtiMa savings target from $80 million to $100 million against the 2024 baseline. The third phase is focused on changes to the management structure, including a reduction in executive and other senior leadership layers, and the consolidation of similar functions. Also included in OPtiMa 3.3 is the optimization of our global real estate footprint primarily in Rhode Island and London. By fully embracing hybrid work arrangements, we have been able to reduce the size of our facilities and in some cases, eliminate them entirely. This has allowed us to reduce overhead cost and lower the company's energy consumption while providing employees the flexibility they value. Of the $100 million savings target, we are well underway for $70 million to be realized by the end of 2026. As far as the balance, we expect 1/3 to come next year and the remaining 2/3 in 2028, the final year of the plan. We are reaffirming our full year 2026 revenue, profit and cash flow outlook. For the second half of the year, we expect accelerated revenue and profit performance as the benefits of our growth initiatives and cost optimization efforts contribute more meaningfully to the results. I would like to offer some perspective on third quarter same-store sales, which are expected to be in line with prior year. In Italy, same-store sales are expected to be flat due to calendarization, which instead will help fourth quarter same-store sales. Overall, for the second half of the year, Italy sales are expected to maintain the low single-digit growth rate achieved in the first half. In the U.S., we expect low single-digit growth in instant and draw games to be offset by lower multistate jackpot games due to a $1.8 billion Powerball jackpot in the third quarter of 2025. Overall, our core business should be helped in Q3 by a couple percentage points of growth coming from the initial slew of product sales under delivery to various jurisdictions. We also anticipate an initial ramp-up of sales in the Italy B2C initiative. Overall, we expect Q3 organic revenue growth to double compared to the 2% growth rate ex U.K. that we have experienced in Q2 achieving about 4% organic growth year-over-year. This should translate to an adjusted EBITDA in line with the first 2 quarters of the year, slightly down versus the previous year, as we continue to invest in our growth initiatives while we have to absorb the strong multistate jackpot impact of last year. In wrapping our [ Q3 ] performance up, Brightstar is committed in investing to secure our future and generate strong returns for shareholders. The first 6 months of 2026 were a solid start to the year with a nice year-over-year improvement in our profitability. The outlook for the second half includes accelerated revenue and profit growth as strategic initiatives begin to contribute more meaningfully and we anniversary the U.K. transition. We look forward to the remainder of 2026 and beyond as a period of renewed growth and operational efficiency built on a solid financial foundation. Now we'd like to open the call up for questions. Operator: [Operator Instructions] Your first question comes from the line of Jeff Stantial from Stifel. Jeffrey Stantial: Maybe just starting off on the Italian business, Vince, appreciate the update earlier on some of the key milestones here for the B2C initiative. I was hoping could you just update us or add a little bit of color to the incentive structure that's been put in place with those? I think you quoted 23,000 retailers to encourage them to drive online conversion. And then looking forward, can you just help us think about some of the key upcoming milestones that we should be thinking about here as you execute on the initiative? And then Max, you mentioned sort of a ramp here in the back half. Can you just confirm for us is your expectation that you'll be sort of hitting that 1% incremental growth uplift that you guys do as part of your 2028 target as early as this year or should we think about that as more of a 2027 target? Vincent Sadusky: Yes. I'll give you a quick update, a little bit more color on Italy B2C and then hand it over to Max. So since we've won the Lotto contract, there's been a terrific amount of work done around the technology, both the system and the hardware upgrades. We're ahead of schedule there as I mentioned. We're now virtually complete with removing and replacing the roughly 33,000 point-of-sale locations around Italy with new terminals and that will help us not only with increased velocity around the existing games, but new games, right? So [Foreign Language] we introduced kind of Pick 3, Pick 4 in the U.S. That's an every 30-minute transaction. We believe now we can move that up considerably. Our goal by the fall is to go to every 5 minutes with that game. And with still the considerable amount of activity and sales generated on the retail channel in these neighborhoods, we think that will incrementally add to the sales growth. But just as importantly is the capabilities that the terminals will provide in terms of assisting the retailers in activation for our particular iCasino app and iLottery app. So we're encouraged. We really haven't done much in terms of interaction with the consumer. All of our efforts so far have been focused on the technology, getting that right, putting the team in place. And so far we've experimented with about 100 -- over the summer so far with about 100 of our close retailers to kind of work out and test and get feedback on the app and on the interaction. Having said that, our iLottery market share is up over a year ago and we continue to grow. Our digital growth was pretty good. I think our iLottery wages were up like over 20% for the first half of the year. But our goal was to have an offering that was on par with the competition in the market, first and foremost, before we had an aggressive launch campaign and we feel like we've accomplished that. I mean we now have over 100, 120 eInstants available online, draw-based games available online. Some mirror the existing retail products. Many are new and unique experiences. We also now carry our competitors' jackpot games as well. And I think we're up to something like 700, 750 casino games, including live casino game capability and sports betting with the best-in-class content providers. So now that we've got that in place, I think the significant milestone for this quarter, as you mentioned, was the recruitment of retailers. And again, as I mentioned in my comments, we think the relationship and the distribution network is a key strategic asset, one that will enable us to compete in this particular space of not only digital sale of lottery tickets, but also some incremental play around iCasino and sports betting. So we're not talking specifically about the deals that we're working out with our retailers. But we do think we have an attractive offering that will motivate a significant amount of those retailers to prioritize and assist us in customer acquisition. Again, don't forget, a portion of the Lotto consortium is owned by the Tobacconist, the largest group of -- most significant group of retailers in Italy. And I'll hand it over to Max for the second part of the question. Massimiliano Chiara: Yes. So to round out a little bit our answer here. In terms of growth projections, we believe we're going to be able to get to a run rate of 1% in the second half. Obviously we need to be very careful because this is a ramp-up business so it's going to grow slower and hopefully grow higher. And also we need to be very methodical in the way we apply our marketing spend, both vis-a-vis the retailers with the recruitment scheme as well as the bonus schemes that are typically allocated to the players. So again as a combination of the 2, we think that we expect to be able to get to that 1% run rate between now and the end of the year. Vincent Sadusky: Jeff, just one of the things you did ask is milestones. Remember we haven't published at this point yet given it's still nascent. But our goal -- our primary driver and most important goal by the end of the year is customer additions. We want to and we have a goal of significantly increasing our monthly active users. That's the primary goal. And with that, we'll have an exponential effect in the future we believe on digital revenue growth in Italy. Jeffrey Stantial: That's great. Maybe just for a follow-up, switching gears and asking more on sort of the competitive environment and the outlook for new contracts. Just from our seat, it does feel like to us there's been a few more contracts specifically in the U.S. with systems creating hands than usual, Ohio, Minnesota, there's been a few others. Just curious to get your views on how you see the competitive environment right now for systems and iLottery contracts as well in the U.S. If you think that incumbent win rates have moved here in a material way over the last few years? And then sort of from a more technical standpoint, with some of these recent RFPs, are you seeing sort of a shift in states rewarding more and more points for AI implementation or broader tech innovation or anything like that? And if so, can you just talk to us a little bit on sort of how you're positioning accordingly to compete in these categories? Vincent Sadusky: Yes, it's a great question. I'd say look, in every industry there's an evolution. Things become more competitive, no company has a moat and we're approaching it from that perspective. When we separate the businesses, right, we just said -- we made a general statement that we'll have more of a singular focus on the lottery business. We see our competition engaged in M&A, looking for incremental growth in other areas that they have not traditionally been in; doing iCasino, sports betting, prediction markets, things in markets that are far from a perfect overlap in markets and not even the same customers. So we've resisted and focused our digital efforts in places where we think we have a right to win; iLottery in the U.S., iLottery in Europe and certainly this B2C initiative that we have in Italy as well; as seeking more meaningful operator contracts around the world, right, including Sao Paulo where we will operate that lottery for 15 years. We think it's a great growth opportunity and with that, we have the right to deploy and execute not only in the retail system, but on the digital side as well in the iLottery side. So we've seen, I would say, different strategic initiatives executed by our competitors. But in terms of increased competition for our business, which is primarily operating big lotteries around the world and providing systems primarily in North America as well as competing on the iLottery front; I would say over the years the iLottery has been the most competitive area. I would say not that much has changed in terms of having the credibility and being able to deliver a system or operate a lottery. And if you take a look at these RFPs as they come out in the meaningful lottery markets, the ones that really matter that are big. Oftentimes you have to have operated a lottery or you have to have provided systems for multiple lotteries for years as a base requirement. And in markets where we have not won' places like Ohio and New Mexico; we are typically the rated highest technically. So we feel good about that. But nonetheless, a lot of this investment that we've been talking about has been on our system area to ensure that we don't take for granted our leadership position and that we continue to progress and accelerate our investment in our systems so we can continue to achieve the best technical score when being evaluated for these lotteries around the world. And also with this inflection point, this incredible point in technology where AI capabilities are truly game changing, we also have the ability to become more efficient in the future. In places where we don't win, it's almost always on price and almost never on the technology offering. And so we recognize this and with this singular focus on lottery, that's been a big part of the investment that Max has been talking about as we invest in our systems and infrastructure as well as our digital offering in Italy and improving our iLottery offering around the world. So it's a dynamic environment. We think it's pretty exciting, but we also feel very good about our leadership position, but we're certainly not taking it for granted. Operator: Your next question comes from the line of Steve Pizzella from Deutsche Bank. Steven Pizzella: You've highlighted a path to more than $400 million of annual free cash flow once you move beyond the current CapEx cycle. Can you walk us through the biggest drivers that bridge you from today's earnings and cash flow profile to the normalized free cash flow level? Massimiliano Chiara: Yes. So this is Max speaking. Again starting from cash from ops, we are currently targeting $750 million for the year excluding obviously the impact of the upfront fee to the Lotto. We believe that number is poised to grow beyond $800 million for the next couple of years as we have already said before. When you take the CapEx and you bring the CapEx down to a normalized mid-cycle from the current $400 million run rate for the last 2 years and the next 2, you basically get to a number that starts with the $600 million, $650 million of free cash flow. When you consider the minority payment between $200 million and $250 million, you basically get to that $400 million. That $400 million to us is only the starting point. We believe that number is poised to grow as we move along the way into the next cycle, which is a cycle that we call harvesting cycle in terms of cash flow once our CapEx cycle is over at the end of 2028. And the plus and minuses on the cash from ops are expected to come obviously from EBITDA improvement as well as the continuation of our efficiency around interest and taxes. Primarily the tax line is coming down significantly from the recent past and we are basically getting the benefit of it mostly this year. Working capital again is net neutral over the cycle so that should not have an impact. So those are the highlights to get to the $400 million plus ex minorities once the CapEx cycle is over. Steven Pizzella: Okay. Then just as a follow-up. Now that you have the final Lotto payment behind you, leverage is below your target and kind of you highlight the attractive valuation in the opening remarks. How are you thinking about share repurchases moving forward? Massimiliano Chiara: So we have remaining authorization of $175 million right now, including the last $10 million that we just completed a few days ago. We believe that we have to continue to nurture shareholder returns going forward in consistency with our balanced leverage target. And just as a reminder, our leverage at the end of June at 3.25x was about 0.25x below our initial expectations. So we are favorable to leverage. So we are acquiring increased flexibility to be able to continue to promote shareholders' return going forward in both ways, dividend and share buyback. Obviously we need to be careful in the way we spend our money and kind of manage it through the quarters as we continue to spend a significant amount of dollars for our investments, particularly in the contract renewals that are expected to come into fruition in '27 and '28. Operator: Your next question comes from the line of Barry Jonas from Truist. Barry Jonas: Was hoping you could give us an update on Mega Millions. Do you think customers are getting more comfortable with the higher price points? And is the committee still working on any initiatives or changes to help drive growth? Vincent Sadusky: Yes. So as you know, we had a really unusual in the history of jackpots, a frequent hit on both Powerball and Mega Millions in the first quarter going into the early part of the second quarter. Fortunately, that slowed and we had a pretty good build of both jackpots and a lot of excitement around Mega Millions as it grew to roughly $800 million and sadly was hit just a week ago or so. But it provided really good organic marketing and Powerball continues to run in the U.S. So it proved that at the $5 price point, perhaps customers -- consumers and players are getting more comfortable with the value proposition. But nonetheless, the weekly sales for Mega Millions is behind the historical run rate and so you don't think folks are fully on board or fully appreciate the changes. So the consortium; we work on some different things, we try to provide some research and insight, but ultimately they continue to think about whether or not they want to change the model. Barry Jonas: Got it. And then just for my follow-up question, another quarter of very strong iLottery growth. We've touched on this in the past, but I'd love to get any updated thoughts you have whether the digital lottery is incremental from a player perspective to retail or if you're concerned about cannibalization, whether that's retail or even other or traditional digital channels? Vincent Sadusky: Yes. Again we've talked about this in the past. I think in every industry, it's difficult to isolate one or the other. I think the criticality is you have to be a leader in both and just simply be available either at retail or have a compelling digital offering for consumers. And the one thing we know is when you look at the combination, those markets that have robust digital offering complementing good retail distribution networks, those are the lotteries that certainly perform the best. And for us to be more specific, right now we're very focused in a couple of areas. One, we think of course the Italy B2C opportunity is our greatest opportunity given our retail strength, the ban on third-party marketing and the fact that there's really a very small percentage of lottery tickets sold online in Italy. So of course that's our value proposition we think and our opportunity. Other large markets, greenfield opportunity in Sao Paulo we think over time could be significant. And also we have a couple of other iLottery platforms that will come online likely in 2027. Missouri, we won that opportunity and Lottery West in Australia as well. So we're very focused on those specific opportunities as well as providing great service to our key platform customers in the U.S. And then also in places where we don't have the platform to continue to produce great games and we continue to increase our share in those markets. Operator: Your next question comes from the line of Chad Beynon from Macquarie Capital. Chad Beynon: Wanted to ask about just distribution in the U.S. with gas prices at these levels. I know over the past couple of years, you all have diversified away from gas stations with C-stores and retailers and other areas. But with the elevated gas prices and maybe a little less in consumers' wallets when they're filling up their tank, have you seen much of an impact at these levels? And as gas prices hopefully come down, could this be a small benefit in the back half of the year? Vincent Sadusky: Yes. I would say it's difficult to tell, to be honest. A lot of the transactions continue to be cash transactions. The transactions that we can trace are digital and the digital shows no sign of slowing especially in markets like North America where we've been providing and the states have been offering iLottery for years, the growth continues very, very strong. And so it seems that the key is to continue to provide game innovation and good interesting, I think, availability of games to the players that are meaningful and interesting at different price points and different types of winnings, be it smaller more frequent winnings or less frequent larger winnings. That seems to be the key. And as we've looked across time, it looks like there is some correlation to the consumer. But as we've said, even in really tough times, lottery sales remain very consistent. So I think one of the other areas where we can help ourselves, you mentioned retailer outlets. A lot of the states have not increased the number of outlets that they've had for years post-COVID. One of the benefits I think of many of these contracts coming up for renewal in North America or extension. It's been a very active period for us over the last 2 years and will be so really through the end of this year is the opportunity to outfit with new hardware, new equipment, more vending machines in the market as part of the RFP process or the extension process. So the teams have been very busy in many states implementing more points of sales. And we did also mention last time that we've got a new national retailer that is very excited about the addition of lottery games to increase their foot traffic and generate a bit more incremental revenue. So we think that will ultimately result in over 1,000 new locations selling lottery games across 6 or 8 of our states this year and thousands more next year. So I think those are the things that will ultimately help to drive sales and perhaps we get a bit of a benefit if gas prices moderate in the future. Chad Beynon: Makes sense. And then on rest of world, just iLottery or digital transformation. I know this has been something we've talked about that there's just higher penetration rates in some markets as those markets have moved slightly from analog to digital. Are there any other, I guess, non-U.S., non-Italian markets that could introduce iLottery? I know in the U.S. these usually come at the same time of year when Congress is pushing these things forward or the lottery boards are. But internationally, are there any markets we should keep our eye on the radar? Vincent Sadusky: I would say for the meaningful markets in Europe in particular, they have had iLottery in place for many years and a lot of that activity is what helped us to build our model and plan for Italy, which again we believe is by all measures underexploited digitally. We don't really talk about the things that we're working on internationally. But again from time to time, we have an opportunity like Sao Paulo, which again is a greenfield opportunity we built the iLottery business from ground up. And overall, I'd say the rest of the world, we had good iLottery growth in the markets where we continue to provide the iLottery platform and provide iLottery games. But again I'd say that we've been laser-focused on Italy, Sao Paulo and continuing to grow our content sales business in markets, primarily North America. Operator: Your next question comes from the line of David Katz from Jefferies. David Katz: Appreciate all the detail. Two sort of questions at once. Is it too early to start keeping an eye on scratch and win, which I think is probably the next sort of larger contract that you'll look to rebid or renew? And then Max, my sense is you probably keep a careful eye on contracts that can go into extension period while they're being rebid. Historically, I recall that those periods can be very earnings productive because they're often fully depreciated, but continuing to generate revenues and profits. Are there any of those out there that we should keep an eye on, whether -- obviously you've given us for this year, but is there a next year or the year after that we can keep an eye on for that? Massimiliano Chiara: Yes. So in terms of the second question so contracts are going to extension. So we just announced Oregon and Washington. So again the answer is yes, from time to time we are able to extend contracts. They don't come completely for free. Obviously there are investment upgrades necessary, which -- but they are at a fraction of a typical bid from day 1. And so we don't -- we tend not to obviously announce contracts until they are signed and executed. So again they're kind of in the making on a regular basis. And as far as the scratch and win is concerned, again it's probably a bit too early. The best kind of reference that we could look at is how Lotto played out in the 2 years prior to adjudication of the bid. So typically, a government comes out either in the budget law or in a specific law decree with the highlights and the key rules of the new concession. We're still waiting for that to happen. And then from there, the whole process unfolds with the preparation and the publication of the bid, the period in which there is Q&A and the potential competitors participate to the bid, submit the bid and then wait for the final results. So again it's a little bit early to talk about that, but again we're going to keep a close eye on that going forward. Operator: Your next question comes from the line of Domenico Ghilotti from Equita. Domenico Ghilotti: A couple of questions. The first is a comment on the guidance. In the sense you have confirmed the guidance. If I'm not wrong, the midpoint you are already almost 50% or 49% already achieved in the first semester. Usually I remember some seasonality particularly in Q4. So I wonder if the confirmation is a matter of prudence or if you think you can maybe be in the upper part of the guidance in terms of EBITDA at least. Second, on Brazil, if you can provide some color on how the operations are performing, some indication, let's say, on the success of the initiative? And third, just a modeling question. With the minorities contribution for the Lotto, I wonder if now it has been completed. So in the first semester you received all the cash payment and you will start paying down the cash flow starting from the second half of this year and for the next years. Massimiliano Chiara: So let me start with the first question about the achievability of the midpoint of the guidance. So I'd like to go back and look a little bit at how we fared in the first half. So overall, our revenue was down 3.5%. But if you exclude the service revenue amortization, we were actually up 4% in revenue year-on-year. That equivalent EBITDA was up 9%. So we were able to actually improve the margin a little bit year-on-year. We closed last year at 41%. I'm quoting margin ex-SRA just to be kind of indifferent from the service revenue amortization change year-on-year. And we achieved a margin in the first half of close to 42%. So call it 1 percentage point improvement in the margin. That comes on the back of the continuation of our OPtiMa program, the addition of profit coming from the same-store sales growth ex the U.K., the famous 2% partially offset by the investment in growth that we've been mentioning now for a few quarters. The expectation for the second half of the year is for that margin to probably come down a little bit from the 42% on the back of the different mix of businesses that we are adding, particularly as a result of businesses in ramp-up phase starting from scratch, they tend to have investment upfront. And so that kind of margin target is not available from day 1. Plus the product sales that we expect to achieve in the second half will contribute favorably to both the revenue and the profit. But typically, our product sales margin runs at lower percentage than the average margin that we generated in the first half. So overall, we feel good in terms of where we stand vis-a-vis the guidance range. But again, we have to keep in mind that there are some puts and takes. And last, but not least, we don't project overarching results on the jackpot. We have to keep in mind that last year we are facing a comp of 2 $1.8 billion Powerball jackpot, one for each quarter, one in September and one in December of last year. And so that also if in absence of a repeat of the same trend structurally would not contribute the same way as last year. So we have to face a couple of headwinds, but we have good tailwinds on our end as well to offset those. So again I think that overall, the guidance range is still logical. In terms of the delevering associated with the end of the Lotto payment period in Italy, I think we have surpassed our best expectations right now. The 3.25x leverage was expected to be achieved at the end of the year '26. So we're happy to report that we are there right now. And so now it's a matter of holding the line and trying to slightly improve that leverage ratio down the road. And again in doing that, we think that we will be able to start to pay off debt that we built to fund the payment of the Lotto upfront payment. Vincent Sadusky: Yes. And I'll just add with regard to your question on Sao Paulo. We've got a really good team in place that's been executing. Our iLottery launch is live with the eInstants in the market. It's early days. There's not a lot of marketing that's taken place because the retail build-out is still taking place and retail will be a big part of the marketing efforts. But we're ahead of schedule in terms of the technology included with -- that it takes to launch an iLottery product. We've gotten the approvals and we are live in the market. And we think as retail comes online as we get into 2027, we'll have good growth going forward. Operator: Your final question comes from the line of Joe Stauff from Susquehanna. Joseph Stauff: Vince, when you were talking about in Italy the new digital offering, you had mentioned that all the lottery products are now available on that, including essentially your largest competitor there with respect to Lottery Flutter. My question to you is they've been offering iLotto for a while on their B2C platform. Largely it's iGaming, say, concentrated. But were they able to sell your lottery products on their digital platform over the last, say, 2 years or is this a new agreement between both of you to be able to do that? Vincent Sadusky: Yes, they've been able to do that. But when you think about a market that's had digital play available for years and with the various competitors in the marketplace, there's the opportunity to offer the competitor's product, but then there's also an emphasis, right? Just the way things are kind of the way your mosaics and tile deliver up. We've talked about our iLottery team's significant advancement primarily through the utilization of AI in understanding our individual player behavior to be able to deliver a more unique experience as to whether or not they prefer games that have animals, that have fruit, that have gems, that are frequent play games with low denomination, less frequent, higher denomination games, et cetera. So there's a lot that goes into serving up the offering much in the way that Google handles search and Netflix handles delivering or Prime Video handles serving up their particular programs and prioritization on the things that they push on their customer interface. So those are the types of things that we've been working long and hard at to really optimize, first and foremost, the player experience, but then also to ensure that we've got the best chance for our games to be played in the iCasino space and certainly mostly in the iLottery space. Joseph Stauff: That makes sense of course. And just to follow up and sorry for the detailed question, but it's an important input for the stock and for the business. Is the functionality now I can go in, let's say, into a retailer, buy one of your lottery products, get a ticket, a retail lottery product and then essentially scan a code on the back that launches me into a digital realm where I can do the KYC and register. Is that the functionality that you have now? Vincent Sadusky: Correct. That's correct. There's a lot of ways to access. You can go to -- a lot of folks already have our lottery app to check numbers, right? So that's a lot of players that just use it to check numbers without actually engaging in any commerce, no KYC stuff, no digital wallet. So there's an opportunity for cross marketing through the folks that already have the app to check numbers, get it through the various app websites, the app stores. But we believe a very significant opportunity for signing up accounts is going to come through what you described, the interaction at the retailer level. Operator: At this time, there are no further questions. I will now turn the call back to Vince Sadusky, CEO, for closing remarks. Vincent Sadusky: Thank you all for participating and listening in. I think we've got a very attractive investment given the current valuation for Brightstar Lottery. Just to sum things up. I think we've got the opportunity for ongoing lottery sales growth driven by digital, which we think will increase in the future. We've made significant investments and we'll continue to do so in organic growth initiatives. We think those are the most valuable and we'll continue to provide greater share worldwide of digital revenue in the future. And when you take a look at the first half of the year, we grew EBITDA as a result of very, very strong cost reallocation plan and we are not cutting back on the investment that we're making in both retail and digital lottery operations. So we appreciate your interest in Brightstar. We look forward to continuing to update you throughout the year. Thanks. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Brightstar Lottery Plc, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Brightstar Lottery Plc wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $411,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* Now, it’s worth noting Stock Advisor’s total average return is 965% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 11, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Brightstar Lottery (BRSL) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Brightstar Lottery? Here are five stocks we like better. Brightstar Lottery exceeded second-quarter profit expectations: Adjusted EBITDA rose 4% to $286 million, supported by 1.5% global same-store sales growth, cost savings and expense recoveries. The company reaffirmed its full-year 2026 revenue, profit and cash-flow outlook. Digital and international expansion remained key growth drivers: First-half iLottery wagers increased 22%, including 29% growth in the U.S., while Italy iLottery sales rose 23%. Brightstar also launched digital lottery operations in São Paulo and continued rolling out its upgraded Italy app and retail terminals. Cash flow reflected a major Italy Lotto payment, but leverage remained controlled: The company made its final $1.7 billion license payment, resulting in negative year-to-date operating cash flow on a reported basis, while net debt leverage stood at 3.24 times and liquidity totaled $1.7 billion. Brightstar raised its OPtiMa savings target to $100 million from $80 million. Brightstar Lottery (NYSE:BRSL) reported second-quarter results that management said featured better-than-expected profit, supported by global same-store sales growth, cost discipline and expense recoveries, while the company continued to fund digital, retail and international expansion initiatives. Chief Executive Officer Vince Sadusky said global same-store sales increased 1.5% in the second quarter, accelerating slightly from the first quarter as U.S. performance improved. Stronger multi-state jackpot activity was the principal driver in the U.S., supplemented by gains in instant and draw games. Sadusky pointed to New Jersey and Indiana as markets where expanded retail distribution, vending machines and digital signage have contributed to growth. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control “We intend to scale these initiatives across the broader portfolio over the next several quarters,” Sadusky said. Chief Financial Officer Max Chiara said reported second-quarter revenue was $584 million. Excluding a $47 million increase in service revenue amortization, revenue was flat year over year as reported and rose 2% excluding the impact of the U.K. transition. Wager-based revenue was flat at constant currency, as global same-store sales growth and favorable U.S. mix were offset by the U.K. transition. → Financials Hit Record Highs as the AI Trade Unravels—Can They Keep Leading? Adjusted EBITDA increased 4% to $286 million, exceeding management’s expectations. The company reported an EBITDA margin of nearly 49%, or 42% when excluding upfront license-fee amortization. Chiara attributed the improvement to same-store sales gains, savings from the OPtiMa cost program and certain expense recoveries. Income from operations was $56 million, compared with a $60 million operating loss in the prior-year quarter. Chiara said the year-over-year turnaround reflected adjusted EBITDA growth, lower restructuring costs, a non-cash foreign-exchange benefit related to euro-dollar exchange rates on parent-company debt, and a lower tax provision. → Why Rare Earth Processing Could Be the Real 2027 Opportunity For the first half, adjusted earnings per share rose 20% year over year to $0.24. That figure included $0.47 per share of non-cash service revenue amortization. Excluding that amortization, first-half adjusted EPS was $0.71, compared with dividends per share paid of $0.46, according to the company. Italy remained a central focus of Brightstar’s growth strategy. Same-store sales growth in the country was driven by instant tickets, including multiplier games, a summer bundle and the continued performance of a new €30 game. Italy iLottery growth was 23% in the first half, led by eInstants. Brightstar launched an enhanced MyLotteries PLAY app in April, offering eInstant, eDraw, iCasino and sports-betting options, alongside loyalty, bonusing and live-chat features. The company also completed upgrades to retail point-of-sale terminals at more than 33,000 locations across Italy. Sadusky said the new terminals are expected to improve transaction speed during peak periods and support new game launches. The company has recruited approximately 23,000 retailers to assist with digital account activation, with retailer engagement beginning in August and continuing into September. Sadusky said Brightstar had initially tested the offering with roughly 100 close retail partners during the summer. During the question-and-answer session, Chiara said the company expects its Italy business-to-consumer initiative to reach a 1% growth run rate between now and year-end, though he cautioned that the business is still in its ramp-up phase. Management said customer additions and monthly active users are key near-term priorities. Brightstar said total iLottery wagers rose 22% in the first half. U.S. iLottery growth was 29%, with expansion in Kentucky and Georgia and strong eInstant content performance in Michigan and Virginia. Sadusky said the company expects additional iLottery platforms to come online in 2027 in Missouri and through Lotterywest in Australia. In São Paulo, Brazil, Brightstar has launched digital lottery operations six months after securing a 15-year concession. Retail lottery operations are planned for later this year. Sadusky said the company has completed the technology deployment and regulatory approvals for the digital launch, though the operation remains in its early stages and has not yet received substantial marketing support ahead of the retail rollout. The company also cited increased instant-ticket printing capacity, which supported a double-digit increase in standard units produced during the first six months. Brightstar reported growth with customers in Texas, France and Poland, and said its GLEAM and Infinity games helped drive production volumes. Brightstar made the final installment of its Italy Lotto license payment during the second quarter. The $1.7 billion payment resulted in year-to-date cash from operations of negative $1.17 billion, or positive $501 million after adjusting for the Lotto payment. Brightstar said it is responsible for 61.5% of the payment, with consortium partners responsible for the remainder. Capital expenditures were $121 million in the second quarter and $232 million in the first half, with the Italy Lotto deployment representing nearly half of first-half investment. The company returned $140 million to shareholders year to date, including $85 million in cash dividends and $55 million in share repurchases. Net debt leverage stood at 3.24 times at June 30, below management’s target level, while total liquidity was $1.7 billion. Chiara said the company has $175 million remaining under its share-repurchase authorization following a recently completed $10 million tranche. Brightstar reaffirmed its full-year 2026 revenue, profit and cash flow outlook. For the third quarter, management expects same-store sales to be roughly in line with the prior year, with Italy sales flat because of calendarization effects and lower multi-state jackpot sales in the U.S. compared with the prior year’s $1.8 billion Powerball jackpot. Chiara said the company expects approximately 4% organic revenue growth in the third quarter, compared with 2% growth excluding the U.K. transition in the second quarter. Adjusted EBITDA is expected to be roughly in line with the first two quarters, though slightly below the prior-year period as the company continues investing in growth initiatives. Brightstar also increased its OPtiMa savings target to $100 million from $80 million against its 2024 baseline. The company expects $70 million of the savings to be realized by the end of 2026, with the remainder expected in 2027 and 2028. International Game Technology PLC operates and provides gaming technology products and services in North America, Europe, the Middle East, Africa, Asia-Pacific, Latin America, and the Caribbean. It operates in three segments: Global Lottery, Global Gaming, and Digital & Betting. The company designs, sells, operates, and leases a suite of point-of-sale machines that reconciles lottery funds between the retailer and lottery authority; provides online lottery transaction processing systems; produces instant ticket games; and offers printing services, such as instant ticket marketing plans and graphic design, programming, packaging, shipping, and delivery services. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Brightstar Lottery Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Wall Street expects a year-over-year decline in earnings on lower revenues when Red Rock Resorts (RRR) reports results for the quarter ended June 2026. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates. The earnings report, which is expected to be released on August 4, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This company is expected to post quarterly earnings of $0.33 per share in its upcoming report, which represents a year-over-year change of -65.3%. Revenues are expected to be $496.53 million, down 5.7% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 1.72% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Red Rock Resorts, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +16.91%. On the other hand, the stock currently carries a Zacks Rank of #4. So, this combination makes it difficult to conclusively predict that Red Rock Resorts will beat the consensus EPS estimate. Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Red Rock Resorts would post earnings of $0.54 per share when it actually produced earnings of $0.73, delivering a surprise of +35.19%. Over the last four quarters, the company has beaten consensus EPS estimates four times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Red Rock Resorts doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Another stock from the Zacks Gaming industry, Brightstar (BRSL), is soon expected to post earnings of $0.02 per share for the quarter ended June 2026. This estimate indicates a year-over-year change of -83.3%. Revenues for the quarter are expected to be $597.52 million, down 5.3% from the year-ago quarter. Over the last 30 days, the consensus EPS estimate for Brightstar has been revised 67.5% down to the current level. Nevertheless, the company now has an Earnings ESP of +100.00%, reflecting a higher Most Accurate Estimate. This Earnings ESP, combined with its Zacks Rank #3 (Hold), suggests that Brightstar will most likely beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates two times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Red Rock Resorts, Inc. (RRR) : Free Stock Analysis Report Brightstar Lottery (BRSL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: $590 million, up 1% as reported and 3% on a constant currency basis. Adjusted EBITDA: $287 million, a 15% increase as reported and 5% at constant currency. Net Debt Leverage: 2.4 times, one of the lowest levels achieved. Shareholder Returns: Over $70 million returned through dividends and share repurchases. Same-Store Sales Growth (Italy): 3% increase. Global iLottery Wagers: Increased 30%, with US wagers up 36%. Capital Expenditures: $110 million, primarily for new terminals in Italy. Cash from Operations: $165 million, with timing impacts expected to reverse in Q2. Cash Dividend: $42 million, or $0.23 per share. Effective Tax Rate: Expected in the high 30% range for full-year 2026. Full-Year Cash Taxes: Expected around $150 million. Total Liquidity: Approximately $1.8 billion. Warning! GuruFocus has detected 6 Warning Signs with BRSL. Is BRSL fairly valued? Test your thesis with our free DCF calculator. Release Date: May 12, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Brightstar Lottery PLC (NYSE:BRSL) reported a solid start to the year with first-quarter revenue of approximately $590 million, reflecting a 1% increase as reported and 3% on a constant currency basis. Adjusted EBITDA grew by 15% as reported and 5% in constant currency, showcasing effective operating discipline and benefits from the OPtiMa efficiency program. The company returned over $70 million to shareholders through dividends and share repurchases, indicating confidence in the durability of cash flows. Global iLottery wagers increased by 30%, with significant growth in the US and Italy, demonstrating strong momentum in digital platforms. Brightstar Lottery PLC (NYSE:BRSL) successfully refinanced its revolving credit facility, extending its maturity to March 2031 with improved terms, enhancing financial stability. Revenue growth was modest, with challenges in the UK transition impacting overall performance. Same-store sales in the United States were flat and below expectations, with significant performance variation by jurisdiction. The New Jersey LMA contract faced a $10 million shortfall due to unfavorable jackpot conditions, with similar challenges expected in the second quarter. Inflationary pressures impacted costs, particularly in postage and freight, although the company believes these are manageable. Second-quarter revenue is expected to be below the prior year due to higher service revenue amortization and potential New Jersey LMA shortfalls. Q: Can you elaborate on the initiatives to drive re-acceleration in the back half of the year and rank their materiality? A: Massimiliano Chiara, CFO, explained that they anticipate a stronger second half of 2026, similar to 2025, with product sales contributing significantly. Initiatives include game innovation, vending machine expansion, and new retailer contracts. They expect a normalization of multi-state jackpots and continued growth in iLottery and Italy B2C initiatives. Q: How are you addressing margin pressure from higher postage and freight costs? A: Massimiliano Chiara, CFO, noted that the inflationary pressure is not significant, amounting to a few million dollars in the quarter. They believe this impact is manageable within their cost initiatives and can be absorbed relatively easily during the year. Q: What are your thoughts on Powerball's international expansion and potential tweaks to Mega Millions? A: Massimiliano Chiara, CFO, stated that Powerball's expansion to the UK is expected to support jackpot formation in the US. For Mega Millions, the $5 price point has not been well-received, and while discussions are ongoing, no decisions have been made by the consortium to optimize the game. Q: With pro forma leverage at 3.5% after the last Italy payment, how are you thinking about capital allocation? A: Massimiliano Chiara, CFO, mentioned that they expect leverage to gradually decrease over the next few quarters. They are committed to their balanced capital allocation plan, including share buybacks and dividends, without compromising core investments. Q: Can you discuss opportunities on the AI front for cost savings or efficiency improvements? A: Vincent Sadusky, CEO, highlighted that AI is being used for game creation, field services, and corporate efficiencies. Their OPtiMa program leverages AI for cost reductions and efficiency improvements, particularly in software engineering and service delivery. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Tuesday, May 12, 2026 at 8 a.m. ET Chief Executive Officer — Vincent Sadusky Chief Financial Officer — Massimiliano Chiara Vincent 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 $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 and 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 & Win performance benefited from the successful launch of new Infinity Instants at EUR 5 and EUR 10 price points as well as Milione Di Manta, 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 [ ByPay by Quattro ], 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, faced more challenging comparisons. One notable highlight was the February launch of Millionaire for Life, a multi-jurisdiction draw game with an enhanced price 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 e-instant 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 eInstant in Virginia. In Italy, wagers increased 27%, supported by new game launches and continued strength in established franchises. Milione Di Manta 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 Sao 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. James Hurley: Please bear with us. It seems like we're having some technical difficulties with Max's mic. Massimiliano Chiara: Can you hear me now? Okay. I apologize. We have some connection issues connecting here from Italy. So I would like to pick up from Slide 10. So 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 $587 million increased 1% as reported. More importantly, growth at constant currency and before noncash service revenue amortization, which is about $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. So we have 1 full quarter plus 1 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 2 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 '26 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 2 factors affecting the New Jersey incentive calculation, a constant increase in the contractual annual net income target, which was known and since the large -- the last large jackpot in late December '25, Powerball hit 2x at or below $250 million. This phenomenon, in addition to the continued subdued Mega Million 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 inflect. 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 cat 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 payout on new instant ticket games, which is already driving stronger sales in March and April. Another is the 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 $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 '26, 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 investment 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 3 main items: the adjusted EBITDA growth just mentioned, FX, which is a noncash 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 2 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 '26 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 totaled $110 million with about 2/3 of the investments related to the rollout of new terminals in Italy. We returned over $70 million to shareholders, including $30 million in share repurchases and a cash dividend of $42 million or $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 2 installments totaling $926 million were paid in 2025 and the final installment of $1.67 billion was paid on April 24. 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 midyear and anticipate that it will subsequently restart a more favorable trajectory thereafter. Total liquidity following the 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, with 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 near-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 target for the current year. Now we'd like to open the call for your questions. Operator: [Operator Instructions] Your first question comes from Jeff Stantial with Stifel. Jeffrey Stantial: Maybe just starting off, Max, that last point that you raised of some initiatives to try to drive reacceleration 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 for Q1 and then last quarter, I think you sort of talked about 3-ish percent, 2% from retail, from iLottery. If you think about how you go from 1% to 3%, you mentioned some initiatives, retailer, self-service terminals, you mentioned sort of the timing of product. Can you just sort of walk through or help us think about rank ordering, which of these is most material? And then 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 state or lottery partner approvals to roll out and sort of your degree of confidence in this back half acceleration? Massimiliano Chiara: Yes. So to ground everyone up around the 5% organic growth projections for the year, we anticipate effectively 2026 to behave more or less similarly to '25, where we see a second half that 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% -- sorry, 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 2 remaining quarters of the year. So again, that is backed by an order backlog with 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. And so all of that together is supposed to give us a little bit of pickup in the second half of the year versus the first half of the year. Then obviously, we would anticipate a sort of a normalization of the multistate jackpot. Again, similarly to what has happened last year, the sequence of jackpots in the first 4 months of the year -- 4.5 months of the year has been extremely negative, even worse than a year ago. And so 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. And then we have the 2 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. Jeffrey Stantial: That's great. And then maybe switching gears, you talked about in the release notes some margin pressure from higher postage and freight costs. Can you just help us think about sort of the magnitude of impact here resulting from the spike we've seen in crude? And on the guidance piece, did you assume sort of a consistent impact through the remainder of the year? Did you anchor to the forward curve? Just how do you sort of think about the impact through the remainder of the year? Massimiliano Chiara: Yes, 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. So we think that this is a manageable number within our cost initiatives. We think we can absorb that impact relatively easily during the year. Jeffrey Stantial: Perfect. And then if I could just squeeze in one quick housekeeping. Apologies if I missed this, Max. Did you say what the embedded euro assumption was for the full year guide? Is it still 115? Or did that move just given I think spot moved a little bit higher since reported? Massimiliano Chiara: Yes. I mean, fair questions. I think at this point, with 4.5 months in, it's probably the right thing to do is to update the FX to the EUR 1.17. There is still some volatility associated with that, but we believe the EUR 1.17 is more appropriate than the EUR 1.15 at this point. Operator: Your next question comes from Barry Jonas with Truist. Barry Jonas: I wanted to start on the multistate lotteries. I believe Powerball is going to be expanding internationally. So I wanted to get your thoughts on any potential upside there and walk us through the timing? And then just on the other side of the coin, clearly, Mega Millions hasn't achieved the results we were hoping with the increase to $5. So there's been some talks about tweaks from the consortium and just wanted to get your thoughts on those potential tweaks. Massimiliano Chiara: We cannot hear you. Barry Jonas: Sorry, did you not hear the question? Operator: This is Ellen operator. Barry, if you could please repeat your question to confirm our speakers can hear it. Barry Jonas: Great. Can you guys hear me now? Massimiliano Chiara: Yes. Barry Jonas: Okay. Great. So my question was a 2-parter on the multistate lotteries. First, Powerball is expanding internationally. So I wanted to get your thoughts on potential upside there and timing. And then for Mega Millions, I believe the consortium is talking about making tweaks to potentially improve results. So I was hoping you can give us some color on those tweaks and expectations there. Massimiliano Chiara: Sorry, I cannot hear, Vince, unfortunately. So I hope Barry you can hear me, and I apologize, but... Barry Jonas: I can hear you. Massimiliano Chiara: We are connecting from different locations. So yes, the Powerball game is expanding internationally and is scheduled to go live in the U.K. later this summer, pending final regulatory approval. The game will cost GBP 4 and the jackpot will be the only share 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 an absolute value per the U.S.-based game contribution. So 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 information that could provide an upside again to the game overall. And so I think this is a positive development at the end of the day because it will create additional support to the development of the jackpot. So we are not per se forecasting any significant sales increase as this type of expansion is unprecedented. So 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 really can take some significant upside. Barry Jonas: Okay. Got it. And then 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? Massimiliano Chiara: Yes. So again, as we all now realize, I mean, the sales on the Mega Millions are below the prior year levels. And 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 '25. 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 one time barely just below the $1 billion. So again, when you take this statistic and compare it to previous years, based on wagers on average, the jackpot would have been hit 2 or 3 times in the same period. So again, the frequency of hitting has been much, much greater than what we have experienced in the previous years. And again, 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. Vincent Sadusky: 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 multistate jackpots in general. So if there's anything else I can help out with there. But otherwise, I think we're back. Massimiliano Chiara: Very good. So I want to -- Barry, just to finish up on this important commentary. As you can imagine, we were grounded on 2 games. Now 1 of the 2 games is definitely structurally underperforming. So there is more -- that puts more pressure on the game, if you want, left, Powerball to perform. And unfortunately, again, also on Powerball, 5 hit since the beginning of the year, all 5 below $250 million or 1 of the 5 at $250 million is really unprecedented from the last few years of statistic. And so 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. Barry Jonas: Understood. Maybe just one more follow-up. Now that pro forma leverage after the last Italy payment is 3.5 and the shares are still depressed. How are you thinking about capital allocation here? And maybe just timing to hit that mid-cycle target of 3x or less? Massimiliano Chiara: Yes. So I think with the payment behind us, we're probably going to see the peak of that leverage on or around 3.5, probably on the low end of 3.5 potentially. And since then, we anticipate that leverage to come down gradually over the next few quarters. And so 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 investments, our core investments 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. And the rest of the program is still open for execution. And 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 2 quarters. We have taken a pause on the increase this quarter because, again, we had to absorb that large last lotto payment in April. But with that in mind, I think we have the ability to continue to support our capital allocation plan going forward. Operator: Your next question comes from Chad Beynon with Macquarie Capital. Chad Beynon: 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 savings standpoint or just from an efficiency standpoint, if any of that has improved as we've kind of worked through the year thus far? Vincent Sadusky: Yes. Chad, I'll take the question. So we've done a lot of work in this area, including using third-party consultants to assist us and then also assess where Brightstar stands relative to others in the industry and then more importantly, I think, outside of the industry. And I think we've -- we're in pretty good shape in terms of our evolution. So I think I've mentioned in the past, a while back, we put in a governance structure for the management and utilization of various AI tools. So 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. And we've got just a lot of best-in-class techniques, including really robust training programs for our managers. So 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. 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 area. So 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. And as the 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. So our Optima program, which Max continually updates that we continue to grow the -- what our projected opportunity is over the next several years. And 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 primarily benefited, and we see benefits increasing over time as we get smarter and better at this and take on more projects and refine our execution. Chad Beynon: That's great. And then 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. Vincent Sadusky: Yes, sure thing. So as we report 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. We've got the -- 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. So we've invested for years. We feel like we've got a best-in-class team. And our acceleration, I think, of the delivery of top-performing games as well as platform refinement has been really impressive. So I think we've got the capabilities that we've built organically that have enabled us to achieve that 20-plus to 30% iLottery growth quarter after quarter. And now it's becoming more meaningful as the absolute number is getting larger. And now we've got a couple of big deployments that are pretty exciting. We go online with Sao 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 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. So the team has been actively involved in the development of that platform and is excited about that launch of eInstant in the third quarter. And then, of course, the B2C area in Italy. That's, of course, our home turf. We've got a very, 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. So still early days in terms of that focused activity around digital in Italy. And 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. So I think we're in good shape. And if there's an area where we'd be looking to potentially engage in M&A, I don't expect it would be anything massive. But the ability to gain some incremental expertise or market share, I think, would be something that we would be open to, where we could quickly synergize and have both the cost opportunity and pick up some incremental market share. So I think we're in fine shape with our balance sheet. I think we're -- even considering the payment on Lotto. And so I think any M&A of that magnitude would not be significant in terms of the impact to the balance sheet. And that's -- those are things that we're currently evaluating. Operator: Your next question comes from Domenico Guilotti with Equita. Domenico Ghilotti: Two questions. The first is on the retail same-store sales performance. You were mentioning so the 3% target. I wonder if this is something that you see well balanced between Italy and the U.S. So if you're expecting some kind of acceleration in the U.S. and/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 so your opportunity for, say, omnichannel approach, if any? So I'm interested in understanding how do you want to exploit this asset? And 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 and expected impact in Q2. Vincent Sadusky: Yes, I can get started and hand it over to Max. Yes. So as we mentioned, I think we got off to a decent start for the year. Global same-store sales were up just over 1%. But given the mix, 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, 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-bed pay slips, I think on Lotto have been effective. And 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 were flattish compared to the prior year. But again, 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 for the quarter, actually more than 30% for the quarter. And we've, again, got this scenario with a very weak multistate jackpot. As Max mentioned, the number of hits was really remarkable for the first quarter this year. And then the rest of the world was fine. Actually, we were up between 5% and 6% in the rest of the world, including Belgium, Poland, Czech Republic. When we look out to the second quarter, I think the trends are in line with what we've seen. They're kind of in the flattish range to up a bit. And 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 some of the categories in the product area that we feel very confident are imminent. And then shifting on over to your question around Italy B2C. So I'd say the numbers that we've achieved so far have been -- 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, 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 MyLotteries app that consumers are impressed and view this as a viable alternative. And the growth that we've had so far, as you'd expect, has been around the iLottery market share. And 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. And 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. So we mentioned in the past, our -- the retail players primarily -- have used the app historically for checking winnings on tickets. And that number of monthly visitors here is somewhere around 1 million. So we have a lot of outstanding leadership position touch points with consumers. And so I think when we get this full functionality in place, we'll be able to utilize all these channels, retail and digital to drive brand awareness and our thinking is that will help to drive player acquisition. And a lot of it has to do with the retailer engagement. And all that is coming very, very soon. And I'll hand it over to Max to handle the LMA question. Massimiliano Chiara: Yes. 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 specificity associated with how relevant the multistage jackpot game is in New Jersey versus the rest of the country. We're talking about an exposure or a penetration of multistage airport games in New Jersey that is about 3 percentage points higher than the average of the United States. In addition to that, the payout on the multistage jackpot games is around 50% versus over 70% on instant games. So any shortfall on same-store sales that comes to fruition as a result of lower multistage jackpot have an outsized impact to the net income generation for the state. And hence, that impact flow through at 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. So 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. And the initiatives that Vincent 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. And that transition is underway. We have 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 of games. We are confident that structurally, we will improve the sales performance of this contract overall and hence, reduce the exposure to the volatility of the jackpot games. So 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. So 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 in -- within that contract. Operator: Your final question comes from David Katz with Jefferies. David Katz: I wonder if you could just talk about iLottery in the context of a TAM, longer-term view. Are we talking about, obviously, growth within what's on your plate right now, but future states, is there any update that we can talk about there that's realistic? And then some kind of a global walk around would be helpful there, too. Just get a sense for how big the opportunity could ultimately be for Brightstar. Vincent Sadusky: Yes, David, it's difficult to say how quickly states will adopt iLottery and which ones they will be. Of course, we've got our Board that we're constantly following and tracking. But it's clearly -- as we've reported out the growth for years now quarter in and quarter out, it's been pretty impressive. And the research we've done shows it not only brings in existing lottery players, but brings in players that just don't have the habit of frequenting retail operations. As you look at the courier services, for example, they charge a pretty hefty premium for the convenience of digital -- of purchasing tickets without having to go to the store versus the states that have full-fledged iLottery operations that don't charge an incremental premium. And yet the couriers have generated a fair amount of incremental sales. In fact, part of our challenge, part of -- one of the things in the negative column for us over this past year, continuing into the first quarter is the decline in sales of one of our big jurisdictions, Texas. And we can attribute that largely to the reversal on couriers and the elimination of couriers, whereas courier sales have been pretty significant in that state that did not permit and still does not permit iLottery. So 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 and also expand our content offering to the markets where we don't have the platform. And we mentioned we've launched in Virginia as well as several other markets we expect to be online when Massachusetts launches, et cetera. So I think we're positioned really well. In terms of what else is going to be launched, we have the platform for a couple of markets, including New Jersey, and we think there's a good chance iLottery launches in New Jersey, Missouri that is coming up, we believe, in the future. And I think Sao Paulo is -- will be pretty interesting over time. And then also the development, I think, of the games, including progressive jackpot games and potentially multistate games as well. So we're busy constantly innovating. We think that's the thing to do as we see how things progress. But as we've said in the past, we believe the lottery directors around the country are very aware of the success that the states who have launched iLottery, the success they've had and the accelerated growth profile that they've enjoyed. And clearly, that's -- I think that's something that they're very focused on. Exactly where the next ones come from, we're not sure. And I would say one other item as well. As you think about the digitization opportunity as being an area for growth for lotteries. And of course, one of the reasons is it gives you -- in addition to convenience, which is what the couriers offered, what the couriers don't offer that we offer in a full-fledged iLottery market is the eInstant games, which are an experience that's very different from traditional scratch cards and pretty fun and exciting, different experience that players clearly enjoy. And just one other item around the area -- I'm not even sure if I would call it innovation, but just how lotteries could have potential incremental growth opportunity. And that's been in the area of cashless. So the cashless adaptation in markets is fairly low. And when you think about digital as the way that everybody is transacting, most states aren't even permissive of noncash transactions, which is astonishing given its 2026. And again, I know the lotteries are aware of the trend among consumers to embrace cashless. And I think there are several states that are either adding or considering adding cashless starting off with the machines -- with the lottery machines. And I think that will also -- has the opportunity to significantly increase purchases. And we've seen the states that do provide for cashless have had a significantly greater amount of sales per transaction as a result of that. And we're not -- the numbers are difficult, but we also believe that the number of transactions are greater as well. Operator: We have reached the end of the Q&A session. I will now turn the call back to Vince Sadusky, CEO, for closing remarks. Vincent Sadusky: Yes, it was a solid start to the year based on the strength of our global portfolio and really good disciplined execution by the team. And 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. And 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 and long-term value creation, and we appreciate everybody continuing to support Brightstar and your interest in the company. Thank you. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Brightstar Lottery Plc, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Brightstar Lottery Plc wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Brightstar (BRSL) Q1 2026 Earnings Transcript was originally published by The Motley Fool

In late February 2026, Brightstar Lottery PLC reported full-year 2025 results showing broadly flat revenue of US$2.51 billion but a lower net income of US$147 million, alongside updated 2026 guidance, a completed US$266.31 million buyback program, a quarterly dividend increase to US$0.23 per share, and board-level changes including a new independent director and the CFO’s planned board exit. A key takeaway for investors is the contrast between weaker recent earnings and the company’s decision to return capital through buybacks and higher dividends, while simultaneously absorbing higher Italy Lotto license amortization and refreshing its governance bench. Against this backdrop, we’ll examine how the higher dividend and updated 2026 revenue outlook affect Brightstar Lottery’s existing investment narrative. The future of work is here. Discover the 30 top robotics and automation stocks leading the charge in AI-driven automation and industrial transformation. To own Brightstar Lottery, you have to believe its long-term lottery contracts, digital expansion, and cost savings can matter more than short-term earnings volatility and jackpot timing. The latest results show flat 2025 revenue at US$2.51 billion but sharply lower net income and loss-making continuing operations, while 2026 guidance points to modest top-line growth alongside heavier Italy Lotto amortization. This does not appear to change the near-term focus on earnings pressure as the main risk. The most relevant update is the 2026 revenue outlook of US$2.50 billion to US$2.55 billion, which includes more than 5% organic growth but around US$175 million of incremental Italy Lotto license amortization. That tension between underlying growth and higher non-cash costs sits at the center of Brightstar’s story right now, especially when set against recent capital returns via buybacks and a higher dividend that depend on cash generation holding up. Yet behind the higher dividend and completed buyback, investors should be aware that rising Italy Lotto license amortization could still... Read the full narrative on Brightstar Lottery (it's free!) Brightstar Lottery's narrative projects $2.6 billion revenue and $295.9 million earnings by 2028. Uncover how Brightstar Lottery's forecasts yield a $20.17 fair value, a 49% upside to its current price. Some of the lowest ranked analysts were already cautious, assuming revenue of about US$2.5 billion and earnings near US$363 million by 2028, so this latest earnings dip and heavier Italy Lotto amortization may prompt you to reassess whether their more pessimistic view of margins and capital strain feels closer to reality than the consensus. Explore 2 other fair value estimates on Brightstar Lottery - why the stock might be worth less than half the current price! Don't just follow the ticker - dig into the data and build a conviction that's truly your own. A great starting point for your Brightstar Lottery research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision. Our free Brightstar Lottery research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Brightstar Lottery's overall financial health at a glance. These stocks are moving-our analysis flagged them today. Act fast before the price catches up: Invest in the nuclear renaissance through our list of 84 elite nuclear energy infrastructure plays powering the global AI revolution. Find 46 companies with promising cash flow potential yet trading below their fair value. Explore 22 top quantum computing companies leading the revolution in next-gen technology and shaping the future with breakthroughs in quantum algorithms, superconducting qubits, and cutting-edge research. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include BRSL. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. Release Date: February 24, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Brightstar Lottery PLC (NYSE:BRSL) reported a revenue of $2.5 billion for 2025, supported by a diverse global portfolio. The company achieved a 45% EBITDA margin, generating $1.1 billion in EBITDA for fiscal year 2025. Brightstar returned over $1 billion to shareholders through dividends and share repurchases, reflecting confidence in cash flow strength. The company secured a critical nine-year Italy lotto license, providing opportunities for digital expansion. Brightstar's net debt improved significantly, reducing from $4.8 billion to $2.7 billion by the end of 2025. The transition of the UK technology contract negatively impacted revenue, offsetting some growth. Brightstar faces a significant valuation discount compared to lottery peers and adjacent sectors. The company incurred higher startup costs associated with a new printing press. Cash from operations was negatively impacted by the Italy lotto upfront license fee, resulting in a reported negative $193 million. The company expects net debt leverage to peak at around 3.5x following the final installment of the license payment in 2026. Warning! GuruFocus has detected 5 Warning Signs with BRSL. Is BRSL fairly valued? Test your thesis with our free DCF calculator. Q: Can you elaborate on the Italy same-store sales performance and expectations for 2026? A: Vince Sadusky, CEO: Italy's same-store sales grew by 0.5% when normalized for timing of draws, slightly below historical trends. However, we exited 2025 with strong momentum, particularly in North America. For 2026, we expect growth driven by new product launches and digital expansion in Italy, alongside continued strength in North America and other regions. Q: Max, you're stepping away from the board to focus on strategic opportunities and M&A. What assets are you considering, and how does M&A fit into your multi-year outlook? A: Max Garra, CFO: The decision aligns with our strategic portfolio transformation. We remain opportunistic about M&A, focusing on assets that enhance growth, particularly in digital and international joint ventures. Our primary growth strategy remains organic, but we are open to M&A that accelerates our plans. Q: How do you plan to utilize the remaining $200 million in the share repurchase authorization? A: Max Garra, CFO: We've returned over 30% of capital to shareholders in 2025 through dividends and buybacks. We will continue to evaluate opportunities for shareholder returns while being mindful of our commitments, such as the lotto license fee. Q: Can you discuss the opportunity in Brazil and its implications for BrightStar? A: Vince Sadusky, CEO: The Brazil opportunity, particularly in Sao Paulo, is significant. We've partnered with Scientific Games to build a modern lottery ecosystem. While it will take time to generate cash flow, we expect meaningful long-term returns from this venture. Q: What are your thoughts on the competitive M&A landscape in the lottery space? A: Vince Sadusky, CEO: We focus on strategic fits that enhance our core strengths in digital and iLottery. While competitors pursue acquisitions in iGaming and prediction markets, we prioritize organic growth and strategic partnerships that align with our geographical and product strengths. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Performance was supported by the resilience of the global lottery portfolio; however, while same-store sales grew nearly 4% for the quarter, normalized growth of 0.5% was more than offset by headwinds from the UK technology contract transition. Management attributed the second-half acceleration in North America to improved multistate jackpot activity and successful game launches in Indiana and New Jersey. The OPTIMA program successfully delivered cost reductions, allowing management to reallocate capital toward high-growth digital and technology initiatives. Securing the nine-year Italy Lotto license is viewed as a foundational catalyst, enabling a major B2C digital expansion across iLottery, iCasino, and sports betting. The Sao Paulo greenfield opportunity represents a rare large-market launch, utilizing a 50/50 joint venture to minimize risk while building a scalable retail and digital ecosystem. Management highlighted a significant valuation disconnect, noting the company trades at a discount to peers despite having more stable cash flows and higher margins than adjacent gaming sectors. The 2026 revenue guidance of $2,500,000,000 to $2,550,000,000 assumes a 5% organic growth rate, led by core business expansion and Italy B2C digital efforts. Adjusted EBITDA is projected between $1,160,000,000 and $1,190,000,000, factoring in $50,000,000 of incremental investments in R&D and contract renewals. Net debt leverage is expected to peak at approximately 3.5x in Q2 2026 following the final Lotto license payment before declining toward a mid-cycle target of 3.0x or below. Capital expenditures are expected to moderate significantly to $200,000,000–$225,000,000 annually after the current 2025–2028 peak investment cycle. Management projects the business will generate an average of $800,000,000 in annual cash from operations during the 2027–2028 period, excluding license payments. The new Italy Lotto license introduces approximately $175,000,000 in incremental annual amortization, which is treated as contra-revenue under US GAAP. The final installment for the Italy Lotto license in 2026 is approximately $1,680,000,000, with Brightstar's proportionate share being roughly $1,000,000,000. The UK technology contract transition remains a headwind for top-line revenue following its commencement in August. CFO Max Chiara is stepping down from the Board to focus on strategic M&A and the separation of management leadership from non-executive oversight. Management explained that while Q4 was flattish due to the timing of product launches, the full-year organic growth in Italy was 3% when normalized for draws. Growth in 2026 will be supported by a robust plan for new product launches and the back-half contribution from the Italy B2C digital platform. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. The company is prioritizing organic growth but remains opportunistic for M&A that enhances iLottery game development or B2C capabilities in existing geographies. Management explicitly stated they are not interested in overpaying for non-strategic assets like prediction markets or high-volatility sports betting platforms outside their core areas. With $200,000,000 remaining on the current authorization, management intends to remain disciplined while noting the stock's current 7% dividend yield. Buybacks will be balanced against the significant cash commitments required for the final Italy Lotto license payment in Q2 2026. The Sao Paulo venture is a 50/50 partnership with Scientific Games, designed to share the start-up capital and operational risks of building a lottery from scratch. While it will take time to generate meaningful cash flow, the project is viewed as a high-potential long-term asset due to the region's strong gaming culture. Management noted that the $5 Mega Millions game has seen a slower build-up than anticipated due to an unusual frequency of early jackpot hits. They observed that Powerball's recent performance confirms that 'jackpot fatigue' is temporary and that player interest remains strong once prizes reach significant levels. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.