Brightstar Lottery PLC Q1 FY2026 Earnings Call

Hello, everyone. Thank you for joining us, and welcome to the Brightstar Lottery First Quarter 2026 Earnings Call. I will now hand the conference over to James Hurley, Senior Vice President of Investor Relations. James, please go ahead.

Our remarks today include forward-looking statements 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, May 12, and we have no obligation to update any forward-looking statements we make. And now I'll turn the call over to Vince Sadusky.

Great. Thank you for joining us today. Well, we delivered a solid start to the year with first quarter results reflecting the strength of our global portfolio and disciplined execution against our strategic priorities. While reported revenue growth was modest, underlying performance was stronger and profitability expanded, demonstrating the resilience of our business model and the impact of our operational initiatives. Revenue for the quarter was approximately $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 a 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.

Please bear with us. It seems like we're having some technical difficulties with Max's mic.

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 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.

Your first question comes from Jeff Stantial with Stifel.

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?

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 2% each quarter. 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 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.

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?

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.

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?

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.

Your next question comes from Barry Jonas with Truist.

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.

We cannot hear you.

Barry, if you could please repeat your question to confirm our speakers can hear it.

Great. Can you guys hear me now?

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.

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?

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.

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.

Very good. So I want to just 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 pressure on 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 multistate jackpot on a year-over-year basis has been very, very limited with the only exception of the New Jersey LMA contract, as I explained in my prepared remarks.

Understood. Maybe just one more follow-up. 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?

Yes. So I think with the payment behind us, we're probably going to see the peak of that leverage on or around 3.5x, 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.

Your next question comes from Chad Beynon with Macquarie Capital.

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?

Yes, Chad, I'll take the question. We've done a lot of work in this area, including using third-party consultants to assist us and assess where Brightstar stands relative to others in the industry and, importantly, relative to companies outside the industry. I think we're in pretty good shape in terms of our evolution. A while back we put in a governance structure for the management and utilization of various AI tools. We have the tools in place, controls and guidelines, and a structured program. We established an innovation committee composed of our senior executives that I chair, and we use a number of best-in-class techniques, including robust training programs for our managers. We've implemented several AI-driven initiatives, such as using AI in art creation for our game development and leveraging AI for our eInstant game launches. Our game recommendation engine, which we believe is best-in-class, uses a significant amount of AI in its technology stack. We've also improved efficiency and effectiveness in field services, which consumes a lot of resources daily across our major jurisdictions, by enhancing troubleshooting and repair support. Beyond that, we've implemented many of the typical corporate AI applications. A big part of the incremental efficiencies and cost reductions we delivered in the first quarter came from innovation and AI. As the team becomes more engaged each quarter, they've been instrumental in identifying incremental opportunities to improve services and efficiency. Our Optima program, which Max continually updates, shows a growing projected opportunity over the next several years, much of which is based on AI—especially around efficiency in software engineering, including delivery and maintenance of servicing. Those are the primary areas where we have benefited, and we expect benefits to increase over time as we get smarter, take on more projects, and refine our execution.

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 and your free cash flow and cash position is maybe just a little bit more understood at this point?

Yes, sure thing. So as we report every quarter, the growth opportunities and the growth areas that we've experienced have, of course, been in the area of iLottery. We are the leading global provider of iLottery platforms and content. Our games are performing great. We have 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 those are things that we're currently evaluating.

Your next question comes from Domenico Ghilotti with Equita.

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.

Yes, I can get started and hand it over to Max. 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, which had a lot to do, once again, with another quarter of great game innovation and strong vitality in the Italian market. I think the product launches, our EUR 30 ticket, were very effective. The multi-bet pay slips 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, which was up more than 30% for the quarter. And we've had a very weak multistate jackpot. As Max mentioned, the number of hits was really remarkable for the first quarter this year. The rest of the world was fine; we were up between 5% and 6% in the rest of the world, including Belgium, Poland and the Czech Republic. When we look out to the second quarter, I think the trends are in line with what we've seen, kind of flattish to up a bit. As we talked about, or as Max really talked about, it's the second half of the year that we get excited about. 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. Shifting to your question around the Italy B2C launch, the numbers we've achieved so far show really good progress with minimal marketing efforts. A big part of the effort has been to assemble a group of games that we think 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—consumers are impressed and view this as a viable alternative. The growth 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, to a lesser extent, also offering consumers the ability to play iCasino games and sports betting. What's most exciting about that opportunity is the ability to work with our retail network as well as leverage the folks who are using the app and the website on a daily basis. Our retail players have primarily used the app historically for checking winnings on tickets, and the number of monthly visitors here is somewhere around 1 million. So we have a lot of outstanding leadership position touch points with consumers. When we get full functionality in place, we'll be able to utilize all these channels, retail and digital, to drive brand awareness and player acquisition. A lot of it has to do with retailer engagement, and all that is coming very, very soon. I'll hand it over to Max to handle the LMA question.

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 multistate jackpot game is in New Jersey versus the rest of the country. We're talking about an exposure or a penetration of multistate jackpot 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 multistate 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 multistate jackpot have an outsized impact to the net income generation for the state. And hence, that impact flows through at 50% to the 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 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 within that contract.

Your final question comes from David Katz with Jefferies.

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.

Yes, David, it's difficult to say how quickly states will adopt iLottery and which ones they will be. Of course, we have our Board that we're constantly following and tracking. But as we've reported, the growth quarter after quarter has been pretty impressive. Our research shows iLottery not only brings in existing lottery players, but also attracts players who don't have the habit of frequenting retail locations. Courier services, for example, charge a pretty hefty premium for the convenience of purchasing tickets digitally without going to the store, whereas states with full-fledged iLottery operations don't charge an incremental premium. Yet couriers have generated a fair amount of incremental sales. Part of our challenge over the past year, continuing into the first quarter, is the decline in sales in one of our big jurisdictions, Texas. We largely attribute that to the reversal on couriers and the elimination of courier sales, which had been significant in a state that did not permit and still does not permit iLottery. That's difficult for us to control. Our focus has been to continue delivering an upgraded platform, including a best-in-class game recommendation engine, to demonstrate our superior capabilities in the marketplace. We have 11 customers live right now in the U.S. and Europe, and we are expanding our content offering into markets where we don't yet have the platform. We have launched in Virginia and expect several other markets to be online when Massachusetts launches and beyond. I think we are positioned really well. In terms of what else will be launched, we have the platform ready for a couple of markets, including New Jersey, and we think there's a good chance iLottery will launch there. Missouri is expected to come up in the future, and São Paulo will be pretty interesting over time. We are also developing games, including progressive jackpot games and potentially multistate games. We're constantly innovating as things progress. As we've said before, lottery directors across the country are very aware of the success and accelerated growth profile enjoyed by states that have launched iLottery, and they are focused on that. Exactly where the next ones will come from, we don't know. One other area for potential incremental growth is digitization. Beyond convenience, which couriers offer, a full-fledged iLottery market provides eInstant games, an experience very different from traditional scratch cards—fun, exciting, and clearly enjoyed by players. Another opportunity is cashless. Cashless adoption in most markets is fairly low, and surprisingly, many states are still not permissive of noncash transactions even in 2026. Lotteries are aware of consumers' trend toward cashless, and several states are either adding or considering cashless options, starting with lottery machines. That could significantly increase purchases. States that do provide for cashless have seen a significantly greater amount of sales per transaction, and while the numbers are difficult to quantify, we also believe the number of transactions increases as well.

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

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.

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