Hello, and welcome to the International Game Technology Fourth Quarter and Full Year 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the conference over to Jim Hurley, Senior Vice President of Investor Relations. You may begin.

Thank you, and thank you all for joining us on IGT's Q4 and full year 2024 Conference Call, which is hosted by Vince Sadusky, our Chief Executive Officer; and Max Chiara, our Chief Financial Officer. After some prepared remarks, Vince and Max will be available for your questions. During today's call, we'll 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. And now, I'll turn the call over to Vince.

Thank you, Jim, and good morning to all. Well, 2024 was a significant year for IGT. We concluded a strategic review that resulted in the announced sale of our gaming and digital business for more than $4 billion in cash. Upon closing, the company will have a singular focus on its leading lottery business, which provides products and services to more lotteries than any company in the world. In 2024, IGT generated over $1 billion in consolidated cash from operations and about $660 million of free cash, highlighting the cash flow generation of the lottery business; more than 80% of that free cash flow came from lottery operations. The $2.5 billion of revenue achieved in the year was consistent with 2023 as growth in core instant ticket and draw games sales were offset by lower U.S. multi-state jackpot sales. Multi-state jackpot games remain popular. However, there were many more winners in 2024, resulting in fewer significant advertised jackpots and resulting in lower sales. The lottery business achieved $1.2 billion of EBITDA at a 47% margin, highlighting its attractive profit profile. The profit and cash flow contributions enabled significant debt repayment during the year. Year-end pro forma net debt leverage, which is adjusted for the $2 billion in gaming and digital sales proceeds committed for debt reduction is 2.4 times, the lowest level in IGT history. Innovation and content and working with our lottery customers enabled improving core lottery same-store sales throughout the year. Instant ticket and draw game sales increased 4% in Q4, including improvement across all regions. Lower U.S. multi-state jackpot comparisons weighed on total reported same-store sales for both Q4 and the full year. While the randomness of large jackpot timing had a negative impact in 2024, they have been a meaningful driver of lottery sales over the last five years. Our product team drove strong growth in Italy in both Q4 and the full year periods. Several new game launches, including the highly successful Tambola holiday bundle and the new Doppio Oro e-instant game were important drivers of Q4 results as were special draws for 10eLotto and Numero Oro add-on feature for traditional lotto. The first scratch ticket in Italy using IGT's proprietary Infinity print technology named POP was well received and has been effective in attracting new younger players as well as upselling existing players to the €5 price point. We believe our exemplary performance in increasing Italy same-store sales and state revenue position us well for the upcoming Italian Lotto bid. Improving trends in large jurisdictions, including California, Florida, Georgia, New York and Texas, drove an increase in instant and draw games sales as the year progressed, especially in the fourth quarter. We play an important role in driving this dynamic. Our experienced operating lotteries and in working with over 100 jurisdictions around the world provides player insights, performance analytics and sales tools that enable a steady pipeline of innovations. The trusted partnerships we have with our customers enables us to offer guidance on game development, portfolio optimization and go-to-market strategies. iLottery sales rose 28% in both the fourth quarter and the full year 2024 period, maintaining the double-digit pace over the last few years. Momentum was broad-based across the US, Italy and several European markets, including Poland, the Czech Republic and Belgium. We've invested significant resources and are committed to our iLottery platform, which is deployed in 11 jurisdictions, making us the number one iLottery platform supplier in the world. During the year, we launched our iLottery platform in Connecticut. Our customers in Georgia and Kentucky have the distinction of being among the fastest-growing iLotteries in the US. Much of this outperformance can be attributed to successful player acquisition programs powered by our iLottery marketing and CRM services. Congratulations to our Georgia Lottery customers surpassing $1 billion in iLottery sales during calendar 2024. We are excited to bring our top-performing e-instant games like Elephant King and Lucky Coins to new content customers. IGT now has content and partnerships with 18 jurisdictions, a recent five-year contract for iLottery content with Baker House in Finland. Our proven track record executing large and complex deployments is unrivaled. For context, our central systems handle billions of transactions annually and are capable of processing approximately 1 million transactions per minute. We are also the leading provider of lottery point-of-sales technology with more than 400,000 retailer terminals deployed globally, four times as many as any other vendor. Another hallmark of our business is the diversity of contracts in our portfolio, supported by an average customer relationship spanning three decades. In 2024, we won a seven-year FM contract with the Colorado Lottery as well as a 10-year FM and iLottery contract with Luxembourg, Loterie Nationale. We also secured several long-term FM contract extensions, including 10 years with the North Carolina Education Lottery and three years with the Mississippi and Virginia lotteries. And earlier this month, we announced a nine-year extension with the Tennessee Lottery. It was also a big year for our instant ticket service businesses, where we won a three-year primary contract in Portugal, displacing an incumbent. We entered a five-year contract with ONCE, the operator of Spain's lottery and a three-year contract with FDJ, the operator of the French National Lottery. These additions will significantly increase production volume in 2025, enabling the company to leverage its new state-of-the-art press. 2024 was a year of significant accomplishments with key strategic initiatives. In 2025, we are focused on winning important contracts in Italy and Texas, which will require significant capital. We will also invest in new game content and technologies that we expect will fuel sales growth and strengthen our lottery industry leadership. Additionally, we are identifying structural cost savings to drive greater efficiencies across the organization, enhancing our financial profile that is already characterized by strong profit margins, significant free cash flow generation and a solid balance sheet. We are diligently working to close the gaming and digital sale, which will provide over $4 billion in gross cash proceeds, significantly strengthening our balance sheet and shareholder returns. Now I'll turn the call over to Max.

Thank you, Vince, and hello to everyone joining us on the call today. IGT fourth quarter and full year 2024 financial results were solid, achieving the outlook for revenue and adjusted EBITDA we provided on our Q3 earnings call. While the timing of large U.S. multi-state jackpots and product sales can cause quarter-to-quarter variability in our financial performance, the core recurring business is healthy and growing in line with expectations, and the margin structure of this business is compelling, delivering adjusted EBITDA margins well above 40%. In the fourth quarter, IGT generated revenue of $651 million compared to $681 million in the prior year, driven by broad-based same-store sales growth in instant ticket and draw games including a 7% same-store sales growth in Italy. This resulted in a benefit from a couple of extra selling days versus the prior year. Strength in IGT core recurring business was offset by the timing impact of elevated jackpot activity and higher product sales in the prior year. It is worth noting that while product sales revenue was lower year-over-year, it was still very strong, achieving the second highest level in company history. Keep in mind that product sales generally tend to be lumpy in nature and typically only represent a mid single-digit percentage of total revenue. For the full year, revenue of $2.5 billion was basically in line with the prior year period. The primary drivers of the year-over-year comparison mirror those in the quarter. While instant ticket and draw game revenue grew $35 million, U.S. multi-state jackpot revenue declined $29 million due to the exceptional levels of jackpot activity in the prior year. Other service rose $3 million primarily due to revenue associated with non-wager based service contracts in Europe, partially offset by lower LMA incentive revenue, a dynamic that is impacted by a relatively long period of time with lower U.S. multi-state jackpot performance. Finally, product sales revenue was lower by $17 million as significant product sales in the prior year were partially offset by an increase in instant ticket services in the current year. Profit generation was solid in both the fourth quarter and full year period. IGT delivered Q4 income from continuing operations of $116 million compared to $73 million in the prior year, and adjusted EBITDA of $290 million compared to $316 million, with the difference almost entirely driven by the volume and mix of product sales. High profit flow through from same-store sales growth was offset by lower LMA incentives and investments in the business. On a full year basis, income from continuing operations was $271 million, compared to $265 million in the prior year period, driven by a non-cash benefit of changes in exchange rates, partially offset by the impact of a discrete tax item and lower operating income. Adjusted EBITDA of $1.17 billion declined from $1.21 billion in the prior year. Service margin was down $25 million, as the benefit of higher instant ticket & draw game sales was offset by three main items. First, a $28 million decline related to the high profit flow-through from elevated U.S. multi-state jackpots activity in the prior year; second, the jackpot related impact on LMA incentives; and third, additional investments we are making in the business, including personnel and project costs, supporting contract renewals and extensions activity. As expected, product sales margin was $26 million lower, driven by the volume and mix. SG&A improved $17 million, reflecting reduced legal costs and R&D was up $7 million, primarily due to continued investments we're making to drive future growth and efficiencies, particularly around cloud initiatives. Adjusted EBITDA margin of approximately 47% highlights the impressive profit profile of this business. On Slide 12 now, in the full year period, IGT delivered a very strong $1.03 billion in consolidated cash from operations with approximately two-thirds being generated by continuing operations. Consolidated free cash flow totaled about $660 million and over 80% was attributable to the lottery business. Shareholder returns remain a key part of our balanced strategy, as evidenced by the $161 million of cash dividends paid to shareholders. We will have a $4.05 billion gross cash infusion when the gaming and digital sale is completed. As previously communicated, we intend to allocate the net cash proceeds in a balanced manner with significant portions being used to repay debt and to be returned to shareholders. The committed $2 billion debt reduction will meaningfully strengthen our balance sheet and further improve our debt maturity profile. Pro forma for this debt reduction, net debt leverage is 2.4 times, using debt balances at year-end. Total liquidity remained solid at $1.9 billion, including $584 million in unrestricted cash and $1.4 billion in undrawn credit facility capacity. We're focused on several strategic initiatives to drive structural cost savings and to fund important investments in the business. OPtiMa 3.0 is well underway, driving real cash cost savings of $40 million by the end of 2026. We continue to explore additional opportunities currently under review, to expand the program with incremental productivity and operational efficiencies in our core business, more to come on this in the near future. Our ongoing success in securing meaningful contract wins and extensions, which is expected to secure revenue and cash flow visibility for the next decade or so, has resulted in the need for higher capital investment in the business for the next couple of years. We estimate annual CapEx spend in the range of $400 million to $450 million in each of fiscal year 2025 and fiscal year 2026, which includes investments to secure important contracts in Italy, Texas and New York. We anticipate annual CapEx in the range of $200 million to $225 million, for the next several years thereafter, reflecting the benefit from temporary cost increases related to investments in cloud, infrastructure and point-of-sale network optimization that are underway. Additional investment of at least €1 billion would be required over 2025 and 2026 to fund the upfront license fee for the Italy Lotto contract. These capital outlays represent investments in our core recurring business and would extend the duration of our revenue-weighted average contract life to more than eight years, including extensions. I would now like to introduce our 2025 outlook. To be clear, IGT core recurring business is strong, providing a solid foundation for the year as we head into the elevated CapEx cycle in front of us. We currently expect revenue of $2.55 billion to $2.65 billion, which reflects low to mid-single-digit growth that is aligned with our long-term expectations for the business. This includes a low single-digit increase in global same-store sales. Overall, service revenue is expected to be negatively impacted by our current expectation of significantly lower U.S. multi-state jackpot activity and associated LMA incentive revenue in the first half of the year. As a reminder, our New Jersey and Indiana LMA contracts include complex incentive or shortfall schemes that can be influenced by protracted times of very high or very low multi-state jackpot activity. Given the difference in the LMA customer fiscal year and IGT calendar year, our Q1 and Q2 are the quarters where we typically have to adjust our expected LMA incentive or shortfall based on the current estimate of the lottery full fiscal year results, which again, can be significantly influenced by the multi-state jackpot behavior. We have provided a page in the appendix of the slides accompanying this call that goes through this impact in more detail. As a result, we expect Q1 revenue to be down low to mid-single-digits versus the prior year period. Product sales revenue is expected to rise primarily due to increased instant ticket services, thanks to several new contract awards, which should provide sustainable growth over time. Adjusted EBITDA is expected to be in a range of $1.1 billion to $1.15 billion. This includes the just described combined impact of significantly lower multi-state jackpot and LMA incentive revenue and about $25 million of temporary costs related to contract extensions and rebids as well as enhancement of cloud-based solution and point-of-sale network optimization that are ultimately expected to deliver future growth and CapEx efficiencies down the road. The impact of these items is primarily concentrated in the first half of the year. In terms of profit cadence, we expect the greatest pressure to materialize in Q1, which we expect to be down approximately $70 million in total, primarily on the jackpot and LMA impacts I outlined as well as a negative mix in product sales to be recovered in the balance of the year and the timing of temporary project costs I discussed earlier. We expect profit in the balance of year period to be essentially aligned with the prior year, including growth in the second half. This outlook does not include any potential benefit from large U.S. multi-state jackpots given the lack of visibility around timing. In addition, the Mega Millions price increased to $5 in April 2025 could drive higher, more frequent jackpots. Cash from operations is forecasted at a negative $300 million, primarily driven by €800 million or approximately $850 million expected to be paid in 2025 related to the first two installments of the Italy lotto upfront license fee. The first payment is due at the time of the award and the second at the start of the new concession. As a reminder, the €800 million reflects 100% consolidation of the joint venture. The pro rata share that our partners contribute to the upfront fee shows up in cash from financing activities on the capital increase non-controlling interest line of the cash flow statement. Excluding the upfront license fee, cash from operations is expected in a range of about $550 million to $570 million and compared to 2024 impacted approximately one-third by lower forecasted EBITDA and two-thirds by the timing of working capital items. CapEx is expected to be around $450 million, including the increased investments related to recent contract wins and extensions as well as important upcoming bids. And lastly, we have assumed a €1.07 rate for full year 2025. In summary, we delivered solid financial results in 2024 with revenue and profit that met our outlook, accompanied by strong cash flow generation and pro forma net debt leverage of 2.4 times. We have committed to allocating at least $2 billion of debt reduction following the significant cash infusion that will be received after the closing of the gaming and digital sales. And we are investing in our future, positioning ourselves to further strengthen our global lottery leadership position as we head into 2025. That concludes our prepared remarks. Operator, would you please open up the line for questions.

Thank you. Your first question comes from Jeff Stantial with Stifel. Your line is open.

Hi. Good morning, Vince and Max. Thanks for taking our questions. And maybe just starting off on the $25 million investment into new contract extensions and rebids as well as some other initiatives. Vince or Max, whoever wants to take this, can you just expand a little bit more on some of these costs. I guess, in particular, are these mostly one-time in nature? Is there some portion of this that is expected to recur in the out years? And then how do you think about underwriting the ROI on some of that investment?

Yes. Hi, Jeff, this is Max speaking. I'll take this one. So as you can imagine, we have to spend some money in relation to R&D and some other project expenses in anticipation of securing a contract bid or extension. And those costs have to be expensed in the P&L until there is certainty of acquisition of the new contract. So we expect those costs to be temporary in nature because they are typically necessary to facilitate the setup of the technology for capacity installation and other technology evolutions that will be required with the start of a new contract. And that makes up the major part of the $25 million for 2025. And again, as I said in my prepared remarks, most of this amount will be spent in the first part of the year. There are two other significant initiatives that we are bringing forward. One is the cloud-based solution extension to all iLottery contracts. We have done many conversions already, particularly in the European countries with significant success achieved in terms of full integration between the retail business and the iLottery business mentioned in Poland, for example. And we are in the process of finalizing the transition to cloud-based also for our large U.S. contracts during the year. So again, that will require some additional expenses during 2025. And finally, we continue to look for ways to innovate and provide opportunities to optimize the activity and the operations at the point-of-sale level. And so we have some expenses associated with recognition of the transition in the communication technology moving away from Visa into mobile for the U.S. market that will also drive additional cost this year until the process is complete. So again, all in all, we expect this $25 million to be temporary in nature.

Perfect. That's really great color. Thank you for that. And then for a follow-up, maybe turning to the pending sale of the gaming and the digital business. Now that we're rapidly approaching deal close, I think it might just be a bit helpful to refresh on how you're thinking about the expected use of proceeds, in particular, focusing on return of capital bucket, recognizing there are some moving parts here with ongoing contract procurements. Could you just update us on kind of your latest thinking here both in terms of the quantum or the amount of the net proceeds that you expect to be allocated to return of capital as well as the preferred mechanism and the cadence of any capital returns? Just any thoughts or perspective you could provide there, keeping in mind the fluidity of the situation would be great.

Yes. We know investors are eager to understand the utilization of the proceeds from the sale of digital and gaming. We completely understand that. What we've communicated is the $2 billion debt paydown, and that's the reason, of course, for the pro forma disclosures around continuing operations, all the financial metrics and also then providing some insight into what day one debt would likely look like. As I mentioned on the call, that enables us to achieve a 2.4 times leverage ratio as of the end of the year, which is just an incredible journey of debt reduction that the company has undertaken very diligently over the last five years or so. In terms of that incremental amount above the $2 billion debt repayment commitment, yes, again, that's something that we will discuss at or around the closing date. We've got some thoughts around the potential utilization. But I think that's something that we're not prepared to do at this point.

Right. That makes sense. I appreciate that. And if I could just squeeze in perhaps a third one in that case, maybe and it might be too early to expand upon here as well. But could you just add some color on how you think about the pro forma org structure for the RemainCo lottery business. Do you have any sense yet for sort of what roles are appropriate for the current team as you transition over to a single operating segment RemainCo, just any kind of high-level thoughts there would be great.

Yes, sure thing. As soon as we wrapped up the announced deal for Voyager, we got to work diligently on what RemainCo's structure would look like. We've determined we are in a singular line of business that was by strategic design. We're very excited about our focus on that business and having the opportunity to operate a company that's got more interactions with lotteries than any other company around the world. And so anything that has to do with gaming and digital has been—we've done the internal work on separation. We're virtually completed with that internal work. So we feel very confident of being prepared for our day one operation of RemainCo systems, ERP, et cetera. And then in terms of the structure, we've done a lot of work internally and had some internal announcements. As you recall, we appointed Renato Ascoli as the head of lottery. We've made some organizational changes to what we think is better to facilitate the core operations, really continuing to innovate and leverage our product expertise around the world as well as putting very capable leaders in charge of our various growth initiatives from our ongoing iLottery operation that continues to achieve very, very strong growth, to, as I mentioned in my prepared comments, the significant increase in the number of instant ticket printing contracts that we've obtained and the investment in our facility in Lakeland. There are things that people really don't see, but our customers appreciate things like cloud transition to really increase our analytical capabilities and our tools that ensure that we remain a trusted lottery partner for decades to come with our customers. And then on top of all that is the need to reduce our overall corporate infrastructure costs given that, by definition, we're a smaller public company. So, of course, we still have all the public reporting requirements, but we are smaller. And that's a lot of that work has come through and will manifest itself in the numbers through what we're calling our OPtiMa 3.0 efficiency initiatives. And Max touched upon that. And as we work towards closing Voyager and sharing more information about our long-term expectations for financial performance, I think you'll be able to see more around what those cost-saving opportunities are beyond the current year.

That's great. Thanks very much. I'll pass it on.

The next question comes from Barry Jonas with Truist. Your line is open.

Hey, guys. Good morning. I wanted to start with Italy. Can we get an update on the lotto rebid process and timing, and with that, a potential bidder has talked about possible synergies with lotto and their digital business. I know IGT doesn't have a digital business anymore, but are there potential partnerships that could monetize such synergies? Thanks.

So I'll get started and let Max talk about the details of the bid. As you all know, the tender has been published. We've been working internally on our bid for the better part of a year now. We've done a lot of work on our technology solution, what we would do to increase and improve our top-rated technology in this next tenure. And we expect obviously to compete very effectively for the opportunity. We believe, as we've said in the past, we've demonstrated with our market and player insights we've demonstrated the ability to continue to grow this very old lottery through excellent product innovation and cost refinement of our offering to players as we've done for about three decades now. I think when it comes to the digital operation, we are not one of the significant players in sports betting and iCasino in Italy. However, we have significantly increased our iLottery penetration and play in the marketplace. And that is something that we believe is clearly an opportunity for us as we think about the future beyond just the ability to be able to exploit the retail lottery operation.

Yes. So just to complete the answer in terms of the process going forward. As you know, the RFP was issued in early January. The bids are due by March 17. Depending on bids being submitted, once the bids are in, the awarding commission will be established, and the composition of the commission will be published after March 17, and is expected to be different from the last bid process of seven or eight years ago. Obviously, the commission will need to assess all the offers and then make an award—there is not a specific timeline for the award of the license. So right now, our expectation is that it's probably likely to happen in Q2. But again, it depends also on the number of bidders that will ultimately show up on March 17. A final comment: the time between the award and the new license start needs to allow for the transition of the infrastructure, which is also an important point in the whole scheme of things here. So with that in mind, we have included in our cash flow estimates for the year the first two tranche payments in connection with those deadlines. So the first one is at the time of award in Q2 for €500 million. And the second one is at the time of inception of the new license, which right now is supposed to start before the end of the year. So call it in November, and so we have the other €300 million related for Q4 at this point in our forecast.

Thank you. Great. That's super helpful. And then just as a follow-up, we've recently seen some pushback in Texas against the carrier model. Can you help us understand how meaningful carriers have become for driving IGT's draw-based sales? And are there any potential risks or maybe legalization opportunities that we should be thinking about going forward?

Carriers have a different approach depending on the desires of each individual jurisdiction. In states where iLottery is permissible, carriers have a minimal or really no footprint as the digital experience is one that's very efficient and effective; there is no incremental fee of the significance of the carrier model, which is where the revenue comes from on a carrier model since the carrier actually needs to go and purchase the ticket, scan the ticket, store the ticket. So there's a real physical cost associated with operating a carrier model. Then you have states that have explicitly permitted carriers to operate. I'd say states like New Jersey, for example, are very forward leaning and essentially their view is we're looking for every opportunity to stimulate as many sales of lottery tickets as possible and maximize return to the state. You have other states like Texas that have been silent around couriers, and so the couriers expanded into a market like Texas. And then you have other markets where there's an absolute statutory prohibition on couriers. So it really depends on the market. From IGT's perspective, the key to keep in mind is, we're contracted by the state lottery organizations, so we operate based upon their direction and our contracts. So that's really what our job is, and we comply with whatever law on couriers each individual market wants to execute. The actual impact on IGT from couriers is based on our percentage of sales, which is typically how we are compensated, and that's regardless of whether a sale is generated at a retail outlet or through a courier. Specific to Texas and the recent announcement banning couriers, the impact to IGT is limited because our percentage of that market is relatively small; courier sales in Texas are still a relatively small percent of overall retail sales. The impact to IGT is insignificant.

Perfect. Thank you so much.

The next question comes from Chad Beynon with Macquarie. Your line is open.

Good morning. Thanks for taking my question. Max, within the guidance and particularly the optimism around the back half of the year making up for the $70 million shortfall in Q1, can you talk about the contemplation or impact around the Mega Millions drawing going to $5 from $2. At this point, what is your understanding in terms of overall advertising or marketing around this new product given it could be a big growth driver for the industry?

Chad, I'll take this. Yes, the Mega Millions price increase is one that I think industry participants are pretty excited to see what the potential is. There is limited experience with price point adjustments in products over the years; it doesn't happen often. Our historical experience has shown that the net of a price point change is positive to very positive. For example, when certain state pick-5 products increased $1, revenue increases were significant for those products. Historically, when Powerball or Mega Millions have increased their price, it has had a significant impact on net sales. What we've modeled out and what the commission has modeled out and we've assisted with is that likely there will be fewer tickets sold but at a greater price point, and there will likely be a temporary adjustment as it takes some time for the increase to work its way through the system and for consumers to recognize the higher starting point of jackpots. Hopefully, the math is right and there will be faster jackpot builds. As we all know, higher advertised jackpots drive a significant increase in sales velocity. So we think it will be positive. It may not be immediate, but as things progress through the year and because the implementation is early in the second quarter, we think that has a good chance to play through the system and have a positive impact on multi-state jackpots, which would be helpful. The move to $5 could positively impact results, especially in the back half of the year.

And Chad, two other elements that help us sustain that revised optimism towards the second half of the year are related primarily to the OPtiMa cost savings initiative. So the cost savings of about $20 million that we expect to achieve in the current year will manifest with fuller benefit in the second half of the year as we ramp up the program. And then finally, the activity on product sales this year evolves more ratably compared to the last two years, where there was more lumpy sales toward the fourth quarter. So the combination of these two factors gives us confidence that we will hopefully be able to deliver a better second half relative to last year in 2025.

Okay. Thank you both. Appreciate it. And then moving on to the new printing press, we're just trying to understand maybe the returns on this. For a better way to think about it, should the new press drive higher same-store growth because of essentially faster printing, more volumes, lower cost of tickets, and will it give you the opportunity to maybe bid differently for some of those instant ticket contracts? Or should we be thinking about it as a margin improvement just reducing some of the costs? I'm thinking maybe back half of 2025 but more longer term, how this changes your competitive offering?

It's really both. The new press improves our ability to win and deliver on larger print contracts and makes our operation more efficient. Our capacity increases significantly. Anyone familiar with print plants recognizes that the decision to invest in a new press is challenging because existing presses can last a long time, but waste associated with runs and technological inefficiencies can be significant relative to a new state-of-the-art press. Printing lottery tickets is particularly complex given the random number generation, coding, covering, scratch mechanics, compliance, activation and shipping. The investment includes the press itself as well as robotics and automation for order fulfillment for our lottery customers around the world. Lead time, logistics and efficiency improve. This will have a strong ROI for us in terms of cost and efficiency. Printing is a volume business: the economics improve substantially as you move closer to capacity. Increased volume will make our plant much more efficient and reduce smaller, inefficient batch runs, coupled with new technology that reduces waste and reprints. Being the most modern print facility coming online will make us more competitive. We're excited and by design we've won larger allocations and new print customers over the last year to utilize this investment.

Thank you, Vince. Appreciate it.

The next question comes from David Katz of Jefferies. Your line is open.

Hi. Good morning, everyone. Thanks for taking my question. Can you just talk about within the guidance that you've laid out, I know one of the dynamics or levers is the development and launch of new product within the lottery business, including in Italy and elsewhere. Can you help us understand what you did in terms of new product launch and development there?

I would say there's two categories. One is our ongoing investment and partnership with our lottery customers around product development—using our analytics to identify opportunities to stimulate growth. For example, for several of our U.S. lottery customers, when we saw decreases in sales for certain products, our product teams worked with them on launches, approvals and odds. Operating in many jurisdictions and being the lottery operator in Italy, Indiana and New Jersey gives us unique insight to provide consulting services. There's no large incremental cost associated with that advisory work, although Max mentioned the cloud investment, and we are in transition. We need to maintain data centers while investing in cloud, which is not just for storage efficiency but to leverage faster analytics and do comparisons across markets. That helps us understand player behavior—repeat buying activity for a $5 ticket versus a $2 ticket product—and suggest product changes. There's also hardware investment: to stimulate growth in markets that softened in 2024, we've executed a strategy to provide more automated machines. Lottery tickets are largely impulse purchases. When sales softened, there was more focus on investing in hardware technology that offers point-of-sale marketing, automatic diagnostics to ensure machines operate properly, age-verification where required, restocking, etc. Another area is In-Lane technology which could be very interesting: enabling purchases right at checkout in grocery or department stores. We've been working on that for a long time; stakeholders are many and it takes time, but testing with our latest generation shows potential and we've invested significantly in that area as well.

Noted. Appreciate that. And if I may just follow up quickly: on the guidance you have laid out on page 13 talking about the average annual CapEx, that sort of excludes any other significant renewals that may occur along the way, so that's kind of a run rate CapEx number?

Yes. So after 2025 and 2026 where effectively our CapEx cycle would come to an end, we expect to be on a run rate basis in that range, $200 million to $225 million. That excludes right now competitive acquisitions.

Understood. Okay. Perfect. Thank you.

The next question comes from Domenico Ghilotti with Equita. Your line is open.

Good morning. Just a couple of questions. The first: is there any update on the Texas lottery renewal process? And second, just a clarification on the incentives or shortfall affecting the first semester. What actually is the situation? Are you facing just a shortfall or just no incentive compared to last year? Should we assume that 2025 in your plan is a neutral year? And do you have any risk of a growing threshold to reach the incentives or risk of a shortfall?

On Texas, the bid has been submitted and the state is evaluating the bid submission, and we expect we'll hear back in the first half of 2025. I'll let Max take you through the financials on the LMAs.

On the LMA, it's effectively a combination of both impacts. When we compare the first and the second quarter of 2025 versus 2024, we were enjoying a significant incentive last year as we were getting to the close of the lottery fiscal year. We saw the behavior on the previous 12 months of jackpot activity—not only the jackpot hits above $1 billion but the number of jackpot runs above $1 billion, which were numerous—and so we were able to true up the accrual to an incentive position. The situation this year is different because when we look back and look forward and take a conservative view in terms of no significant jackpot runs happening between now and the end of June, we have to take a conservative view. Again, we have an estimated impact, which is the $40 million to $50 million we mentioned; it is a combination of the two. So it's a small shortfall and is a delta compared to last year of a lower incentive. That remains an estimate at this point; we still need to see if that comes to fruition in the last four months of the lottery fiscal year.

Clear. And do you have a growing threshold going forward? Or does the threshold grow over time for the LMA contracts?

There are different elements that make up the structure of the incentive/shortfall in terms of minimal net income and target net income that triggers partial penalties or partial incentives. So again, it's complicated. But in a nutshell, as the market grows, the threshold can become more demanding.

Okay. Thank you.

The final question comes from Joe Stauff of Susquehanna. Your line is open.

Thanks. Good morning, Vince and Max. Just real quick, in terms of the Italian renewal process, will the government publish or provide any indication subsequent to the March 17 deadline of competing bids or not? And then I was wondering if Powerball— I know they initially said that they're sticking with their pricing structure, but is there any expectation to assume Powerball also moves to increase their pricing at some point?

With regard to the lotto process there is not a public forum in the process. Questions asked by bidders are made publicly available and the number of bidders will be public after the deadline once RFPs are submitted. Regarding Powerball, I can't speak for the group that manages Powerball, but it's been a long time since there has been a price increase in either Mega Millions or Powerball. It's reasonable to expect that Powerball will pay close attention to the impact of Mega Millions' increase and consider its future pricing decisions.

Makes sense. Thanks a lot guys.

This concludes the question-and-answer session. I will turn the call to CEO Vince Sadusky for closing remarks.

Yeah. So again, just to summarize, 2024 was a big year for IGT. We concluded our strategic review to sell gaming and digital for more than $4 billion in cash. Once we close, as we've mentioned, we're going to have a singular focus on our leading lottery business, which provides products and services to more lotteries than any company in the world. As we look out into the future, we think we're in a very good position to extend and secure our contract portfolio for many years, which will enable us to deliver compelling returns for customers and shareholders while maintaining a very strong balance sheet. And as always, we appreciate your interest in IGT. Have a great day.

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