Brightstar (BRSL) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, Feb. 24, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Vincent Sadusky
• Chief Financial Officer — Massimiliano Chiara

TAKEAWAYS

• Revenue -- $668,000,000 for the quarter, up 3% compared to $651,000,000, driven by elevated US multistate jackpot activity and strong iLottery performance.
• Same-store Sales -- Increased nearly 4% for the quarter and 2% for the year, highlighting operational consistency globally.
• Full-year Revenue -- $2,510,000,000, flat with prior year, as higher instant ticket and draw game demand and FX gains mitigated $51,000,000 of prior-year LMA incentive revenue and $18,000,000 from the UK technology contract transition, plus $25,000,000 from Italy Lotto license fee amortization.
• Adjusted EBITDA (Q4) -- $304,000,000, up 5% from $290,000,000, with strong flow-through from US jackpots partially offset by UK contract transition costs.
• Adjusted EBITDA (Full-year) -- $1,120,000,000, down from $1,170,000,000, as higher prior-year LMA incentives, UK transition, and printing press start-up costs outweighed wager-based revenue growth.
• Cash from Operations (Full-year) -- $733,000,000 before upfront license payments, or negative $193,000,000 as reported after $926,000,000 in Italy Lotto fee payments.
• Free Cash Flow (Full-year) -- $417,000,000 before license payment adjustment, negative $509,000,000 as reported, with adjustments for the Italy Lotto license.
• Shareholder Returns -- Over $1,000,000,000 in 2025, comprised of $770,000,000 in dividends ($3 per share special, $0.82 per share regular), and $271,000,000 in share repurchases.
• Share Repurchase Activity -- 18,600,000 shares repurchased to date, representing 9% of shares outstanding; $200,000,000 of the $500,000,000 authorization remains.
• Dividend Increase -- New regular quarterly dividend raised to $0.23 per share, reflecting a 15% increase over the historical run rate.
• Net Debt -- Reduced to $2,700,000,000 from $4,800,000,000, following $2,000,000,000 debt retirement using IGT Gaming sale proceeds.
• Net Debt Leverage -- Improved to 2.4x from 4.1x, expected to peak around 3.5x after the final Lotto installment, then decline, with a long-term target at or below 3x.
• Liquidity -- Total exceeds $3,000,000,000, covering the company’s remaining Italy Lotto fee obligations.
• 2026 Revenue Outlook -- Guidance of $2,500,000,000–$2,550,000,000, which embeds $175,000,000 of incremental Lotto license fee amortization as contra revenue and implies more than 5% organic growth at constant currency.
• 2026 Adjusted EBITDA Outlook -- Projected at $1,160,000,000–$1,190,000,000, as organic gains and OPTIMA savings counter $50,000,000 of incremental growth-related investments.
• 2026 Cash from Operations Guidance -- Expected at negative $900,000,000 (including final Italy Lotto installment), or positive $750,000,000 before this obligation.
• 2026 CapEx Guidance -- $450,000,000–$475,000,000, with three-fourths linked to secured contract obligations.
• 2028 Targets -- Revenue goal of $2,750,000,000 and adjusted EBITDA of around $1,300,000,000; implies average annual cash from operations of $800,000,000 for 2027–2028, pre-license payments.
• OPTIMA Program -- Targeted $50,000,000 in cost savings by 2026 versus a 2024 baseline, tracking on plan and reinvested into growth.
• Italy Lotto License -- Secured nine-year term and renewed at a cost of €1,430,000,000 final installment due in 2026, with Brightstar’s share at €880,000,000 (approx. $1,000,000,000).
• Italy Digital Expansion -- Launched integrated B2C iLottery, iCasino, and sports betting under My Lotteries app, reporting over 20% iLottery wager growth for 2025 and three percentage points of market share gain since January launch.
• US Lottery Performance -- North America led second-half acceleration, with New Jersey same-store sales up ~6% and Indiana up nearly 7%, driven by payout increases, new game launches, and vending machine rollout.
• Sao Paulo, Brazil Initiative -- Entered into a new 50-50 joint venture with Scientific Games for a large-scale, greenfield lottery launch covering both retail and digital channels.
• Capital Allocation Strategy -- Multiyear plan prioritizing both increased shareholder returns and investment in digital, geographic expansion, and technology.
• Debt Refinancing -- Issued $750,000,000 in 5.75% senior secured notes due 2033 to retire 6.25% 2027 bonds, reducing interest expense and extending debt maturity profile.
• Organic Growth Profile -- Management reiterated a 5% three-year CAGR expectation from 2025–2028, led by Italy B2C, iLottery, and US retail expansion.

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RISKS

• Cash Flow Impact from Italy Lotto License -- Full-year reported cash from operations was negative $193,000,000 due to $926,000,000 in upfront Lotto license fees, with additional final installment of €1,430,000,000 due in 2026 that will further pressure reported cash flow.
• UK Technology Contract Transition -- Transition offset otherwise positive same-store sales growth and profitability, with $18,000,000 impact on top line and margin pressure noted.
• Elevated CapEx Cycle -- Peak capital expenditures through 2028 driven by contractual wins, compressing free cash flow until CapEx moderates to $200,000,000–$225,000,000, as outlined by management.
• Amortization as Contra Revenue -- New Italy Lotto license includes ~$175,000,000 annual amortization (as a US GAAP contra revenue), directly reducing reported revenue and earnings through the license term.

SUMMARY

Brightstar Lottery (NYSE:BRSL) highlighted continued top-line growth, resilient margins, and further deleveraging as it delivered $668 million in quarterly revenue and drove year-end net debt leverage to 2.4x, following substantial debt reduction funded by gaming asset divestiture. Management secured the pivotal Italy Lotto license for nine years and rolled out digital B2C products, contributing to more than 20% iLottery wager growth and new market share wins in Italy. Though headline cash flows are temporarily negative due to Italy Lotto license payments, adjusted free cash flow before license fees exceeded prior guidance and supported more than $1 billion in shareholder returns. The company reiterated confidence in its organic growth targets, guiding for over 5% constant-currency growth, and reinforced a multiyear capital allocation strategy emphasizing both shareholder returns and investment in long-term digital and geographic expansion.

• Management characterized current valuation as a "significant valuation discount to publicly traded lottery peers" and underscored a dividend yield exceeding 6% at recent share prices, describing the dislocation as "pretty incredible".
• Brightstar's 2026 cash flow outlook, after adjusting for upfront license charges, aligns with 2025 adjusted performance, with a targeted cash tax payment decrease from over $200 million to about $150 million.
• The Sao Paulo launch, as a 50-50 joint venture with Scientific Games, represents a rare, large-scale, greenfield, international lottery opportunity combining retail and digital channel development.
• New senior digital gaming executive Victor Kukorian joined to drive expansion and optimize customer conversion for the My Lotteries digital B2C platform.
• Brightstar indicated M&A will remain opportunistic, focused on opportunities that strengthen B2C, iLottery, and platform expansion, but will refrain from overpaying for assets outside its core strategy.
• US iLottery business continues to build momentum with top-performing game content and sustained contract wins, although legislative expansion in new states remains incremental, at a rate of one to two markets annually.
• Adjusted EBITDA guidance for 2026 contemplates $50 million in incremental growth investments, offset in part by continued OPTIMA cost reductions.

INDUSTRY GLOSSARY

• LMA (Lotterie Monopolio Amministrazione): Refers to regulated, government-monopoly lottery jurisdictions, especially in Italy, impacting incentives and revenue cycles.
• Contra Revenue: Accounting treatment whereby certain revenues, such as amortization of license fees, are recorded as reductions to reported revenue rather than as expenses.
• OPTIMA Program: Brightstar Lottery’s company-wide cost efficiency and reallocation initiative, targeting $50 million in annual savings by 2026.
• B2C: Business-to-consumer sales model, in this context referring to digital platforms targeting players directly in regulated lottery and gaming markets.

Full Conference Call Transcript

Vincent Sadusky: Pure play lottery leader. We strengthened our balance sheet, improving leverage to the best levels ever, secured the critical Italy Lotto license, and introduced a multiyear capital allocation strategy that both increases returns to shareholders and provides investment capital to fund Brightstar Lottery’s growth initiatives in digital, core technology, geographic expansion, retail points of sale, and printing. We generated $2,500,000,000 in revenue supported by the diversity of our global portfolio. Same-store sales grew nearly 4% for the quarter, and 2% for the year, underscoring the consistency and resilience of our global lottery operations. At the same time, we invested heavily in our teams, our technology, and our processes, enhancing the organizational capabilities that will support the next decade of growth.

Our OPTIMA program delivered cost reductions enabling funds to be reallocated to growth initiatives. $1,100,000,000 of EBITDA in fiscal year 2025 represents a 45% margin even as we are investing for the long term. We also produced nearly $750,000,000 in cash from operations before funding the first two lottery license payments, returned over $1,000,000,000 to shareholders through dividends and share repurchases, and announced two consecutive dividend increases, including the new quarterly payout of $0.23, which is a 15% increase from the historical run rate. These actions reflect our confidence in the strength, durability, and long-term growth potential of our cash flows. 2026 will be another year of investment in several long-term growth initiatives.

In Italy, securing Lotto for the next nine years provides the opportunity to execute a major digital expansion across iLottery, iCasino, and sports betting, leveraging one of the largest retail networks in the world with over 50,000 points of sale. This is an opportunity to extend our reach, broaden our B2C capabilities, and bring new digital experiences to one of the world’s most established lottery markets.

Vincent Sadusky: We are also investing in our US retail footprint by adding new points of sale, deploying self-service solutions, and partnering with national retailers to expand lottery access across the country. Internationally, one of the most exciting developments is in Sao Paulo. As the economic engine of Brazil and one of the largest global metropolitan regions, Sao Paulo represents a rare, large-market, full-service, new lottery launch. We are building this business from the ground up, combining our technology, operational excellence, and game innovation to create a modern, scalable lottery ecosystem across both retail and digital channels.

Initiatives combined with ongoing expansion in iLottery content, new games, data-driven CRM tools, and advanced AI capabilities, position Brightstar Lottery to accelerate organic growth and extend our industry leadership.

Vincent Sadusky: Brightstar Lottery today is the largest and most advanced lottery operator and technology provider globally, across both retail and digital channels. Our core business is one of the most stable and predictable models in gaming or entertainment, and it has demonstrated remarkable consistency through all economic times. On top of this solid foundation, we are executing targeted growth initiatives in Italy B2C digital, iLottery, US retail expansion, and Brazil’s Sao Paulo greenfield opportunity, each of which enhances our long-term growth profile.

Despite our leadership position, strong margins, and highly resilient cash flows, Brightstar Lottery continues to trade at a significant valuation discount to publicly traded lottery peers and an even larger discount relative to adjacent sectors such as sports betting and iCasino, which operate with far lower EBITDA and far greater volatility. Current valuation discount versus peers presents a compelling opportunity for investors. With durable cash flows and multiple growth catalysts underway, we are well positioned to realize the full value of our focused lottery platform. Now I will turn the call over to Max.

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

Massimiliano Chiara: US multistate jackpot revenue rose year over year, driven by the $1,800,000,000 Powerball and the $980,000,000 Mega Millions jackpot that hit in the quarter. Other service revenue includes the impact of higher amortization related to the Italy Lotto upfront license fee. The new Lotto license commenced in early December and adds about €41,000,000 a quarter in additional amortization. It is treated as contra revenue under US GAAP. Favorable foreign currency rates also helped drive the year-over-year increase in revenue.

Full year 2025 revenue of $2,510,000,000 was in line with the prior year and included the benefits of increased demand for instant ticket and draw games and favorable foreign currency rates, which mitigated some meaningful headwinds, including $51,000,000 from higher LMA incentive revenue in the prior year, and current year impacts of $18,000,000 from the UK technology contract transition, and $25,000,000 from the incremental Italy Lotto license fee amortization. We delivered adjusted EBITDA of $304,000,000 in the fourth quarter, a 5% increase compared to $290,000,000 in the prior year. Favorable foreign currency rates drove the year-over-year increase in profit. Operationally, the high flow-through of elevated US multistate jackpot activity was more than offset by the UK transition.

OPTIMA cost savings, split relatively equally between service gross margin and other operating expenses, were partially offset by project expenses related to contract bids as well as enhancements of cloud-based solutions and point-of-sale optimization. For the full year, adjusted EBITDA was $1,120,000,000 compared to $1,170,000,000 in the prior year period, as growth in wager-based revenue was more than offset by higher LMA incentives in the prior year, the UK transition, and the timing of terminal and software service deliveries in our product sales vertical. We also incurred higher start-up costs associated with the new printing press. OPTIMA cost savings are tracking nicely to our target of around $50,000,000 by 2026 versus a 2024 baseline.

These savings are not readily apparent on the face of the financial statements, as they are somewhat offset by the investments in the business that I just described, which we are incurring to drive growth in pursuit of our 2028 financial targets. Sustained cash generation funded key investments and significant shareholder returns in 2025. On a full year basis, both cash from operations and free cash flow included $926,000,000 related to the first two installments of the Italy Lotto upfront license fee, which were paid in July and December 2025. The full amount of the license fee is reported in cash from operations.

Brightstar Lottery is only responsible for its 61.5% share, or $569,000,000, of the amount paid in full year 2025. Cash from operations as reported was a negative $193,000,000, or a positive $733,000,000 before the upfront license fee, exceeding the recently revised guidance. Free cash flow was negative $509,000,000, or a positive $417,000,000 when you make the same adjustment. As a reminder, the Lotto license renewal occurs every nine years, and these figures do not include the benefit of the pro rata contributions from our minority partners. The final installment of the upfront license fee is €1,430,000,000, or approximately $1,680,000,000, and is expected to be paid in 2026. Brightstar Lottery’s proportionate share of the final payment is €880,000,000, or approximately $1,000,000,000.

As Vince mentioned, Brightstar Lottery delivered significant shareholder returns, over $1,000,000,000 in 2025, including $770,000,000 in cash dividends comprised of a $3 per share special dividend and regular quarterly dividends totaling $0.82 per share, and $271,000,000 in the form of share repurchases through a $250,000,000 accelerated share repurchase program and a 10b5-1 plan. To date, in 2026, we repurchased an additional 2,100,000 shares for a total cost of $30,000,000 via the 10b5-1. We have utilized to date 60% of the $500,000,000 share repurchase authorization that was approved in Q2 2025, repurchasing 18,600,000 shares, representing a 9% reduction in shares outstanding. $200,000,000 remains under this authorization.

In addition, today, we announced a $0.23 per share regular quarterly cash dividend to be paid in March. This represents a $0.01 increase from the prior quarter when the dividend was raised by $0.02. In aggregate, these increases reflect a quarterly cash dividend that is 15% higher than the historical run rate. This reflects our confidence in future cash flows and reinforces our commitment to increasing shareholder returns. Net debt improved significantly to $2,700,000,000 at the end of 2025, compared to $4,800,000,000 at the end of 2024, mainly due to the allocation of $2,000,000,000 for debt reduction from the IGT Gaming sale proceeds.

Net debt leverage was also reduced to 2.4x compared to 4.1x at the end of the prior year, providing room to absorb the Lotto upfront license fee and still maintain leverage at a manageable level. We expect net debt leverage to peak at around 3.5x following the final installment of the license payment in the second quarter, then begin to decline thereafter. Our target leverage ratio mid-cycle is at or below 3x. Our financial condition is strong with no significant near-term maturities, due in part to the successful issuance of $750,000,000 5.75% senior secured notes due in 2033, the proceeds of which were used to retire $750,000,000 6.25% bonds due in 2027.

And we have over $3,000,000,000 in liquidity, which is more than enough to fund our portion of the remaining Lotto license fee. Now I would like to introduce our outlook for 2026. We expect to generate revenue of $2,500,000,000 to $2,550,000,000, which includes about $175,000,000 in incremental Lotto license fee amortization as a contra revenue item. This target represents a more than 5% organic growth rate on a year-over-year basis, led by expansion of our core business in Italy, our core business and Italy B2C digital efforts, and is in line with the three-year CAGR we expect to generate from 2025 to 2028.

Adjusted EBITDA is forecasted between $1,160,000,000 and $1,190,000,000 as organic growth and OPTIMA savings more than offset an additional $50,000,000 of investments we are making in growth initiatives such as Italy B2C and iLottery expansion, R&D investments in technology, product and services, and project costs associated with the extensive contract renewal cycle recently completed and in progress. Our outlook assumes a euro-dollar exchange rate of 1.15 throughout the year. Cash from operations is expected to be a negative $900,000,000, or a positive $750,000,000 when you adjust for approximately the $1,680,000,000 related to the final Lotto license fee. CapEx is expected to be in the range of $450,000,000 to $475,000,000.

About three-fourths of this investment is related to contractual obligations associated with wins and extensions we have already secured. The balance is primarily related to upcoming bids not yet secured. We recently communicated 2028 financial targets: revenue of approximately $2,750,000,000 and adjusted EBITDA of around $1,300,000,000. 2025 actual results, the 2026 outlook, and 2028 targets are laid out here to highlight we are on plan to achieving those goals. You can infer we believe the business can generate an average of $800,000,000 in cash from operations in the 2027–2028 period annually, excluding upfront license payment.

As a reminder, following the 2025 to 2028 peak CapEx cycle, we expect CapEx to moderate to about $200,000,000 to $225,000,000 annually, yielding over $400,000,000 in annual free cash flow before or after license fees and after minority distributions. This would represent a mid-teens free cash flow yield at the current share price. Now, we would like to open the call for your questions.

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

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

Vincent Sadusky: Yes. Sure thing. So when we reviewed 2025 and the fourth quarter, we would say we exited 2025 with really good momentum. And that was the great thing about being international and having strong operations around the world is, you know, certain quarters, you have got really good launches of products in certain markets in North America or Italy, other quarters, you do not. And so having that geographical and product diversity, we think, is really, really effective. So as you know, Italy has driven a lot of the growth for us. And it turned in the back half of the year where North America was a significant contributor.

And I guess a couple of observations when we look at performance for the year and we think about our plans for 2026. When we look at the first half of the year versus the second half, there was a clear acceleration throughout the year in core sales. The first half of the year, as we know, was challenged as a result of the impact of really low jackpot activity and then the calculation around the LMA at the back half of the fiscal year, just the way the math worked out, unfortunately. In the second half of the year, though, we saw meaningful acceleration. We had strong same-store sales growth, and that came largely in North America.

We had better multistate jackpot performance, which was more in line with the historical averages. And, again, continued double-digit iLottery gains in both the US and in Italy in our LMA jurisdictions. Showed a clear recovery as well. We had mentioned on previous conference calls that we had put some initiatives in place that we were hopeful would have an impact. And New Jersey was up, I think, in the 6% range or so for the back half of the year, which was driven by a long-standing effort by our government relations team to work with the lottery commission in the state to increase the payouts, as well as an incremental drawing.

And in Indiana, we had some good game launches, and we also talked in previous quarters about the installation of our automated vending machine just to create more frictionless points of sale in the market. That seems to be having an impact as Indiana was up, I think, close to 7% in the second half of the year. And so I would say those things all bode really well going into 2026. On the Italy front, as you pointed out, the fourth quarter same-store sales normalized was just a little, had very low growth. But we had good iLottery growth. We did not have the product launches that we wanted. We are going to have those going.

We have a pretty robust plan going into 2026. And then the rest of the world contributes less certainly, but the fourth quarter same-store sales in rest of the world were up about 5% driven by Poland and Belgium. So overall, I would say, despite a more challenging start to the year, we did have a strong second half of the year. And it just comes from different places depending on the timing of product launches, etcetera. When we look ahead to 2026, you know, we have seen we have been up around 1% or so in same-store sales versus the prior year.

And that has been very similar to the way we exited 2025 in that it has been led by the US and the rest of the world. Italy is flattish. And we have some new product launches coming up and as well as we expect certainly in the back half of the year more significant contribution from the Italy B2C digital launch that we discussed. As well as we are increasing our network expansion and working with our customers on their development plans. So we think all those things have the capability to deliver growth especially as the year progresses. That is great. Thanks for all that color, Vince.

And then maybe just one on, there was a note in the release. So, Max, you are stepping away from the Board. It sounds like to focus a little bit more on some strategic opportunities and M&A, focusing more on the M&A side of that equation. What sort of assets do you see as strategically additive to the business? What is the market like currently for assets being shopped around and how much of a priority here should we think about M&A being, call it, relative to executing on that multiyear outlook that you laid out for us last quarter?

Massimiliano Chiara: Yes. So first of all, I would like to give a little bit of rationale behind the decision on not seeking reelection to the Board after a six-year tenure. This has been taken in conjunction with the conclusion of the Brightstar Lottery strategic portfolio transformation that has again just been completed with the sale of the IGT Gaming business, and then also as part of a deliberate governance evolution to strengthen the separation between management leadership and nonexecutive oversight at Board level.

In this respect, I will continue to operate in close partnership with our Executive Chairman, Marco Sala, and with Vince on my CFO duties, as well as, as you said, on the additional responsibilities attributed to me in the areas of strategy and M&A. Speaking specifically on M&A, I would like to remind everyone that we have a very compelling plan with a significant step up in our growth rate to 5% organic. That plan, obviously, was drafted during the transition period on the gaming sale and entails significant strategic initiatives, primarily to develop that and favor that growth through various individual engine initiatives. So, fundamentally, our plan is commensurate with a significant portfolio of organic growth.

But definitely, we continue to remain opportunistic on M&A, particularly if opportunities were to arise in the market in areas where we have opportunity to enhance our growth faster and accelerate our plan.

Vincent Sadusky: Yes. I would just add to that. You know, when you think about the unique space that Brightstar Lottery operates in and where it has significant right to win and significant strengths, it is in the area of digital, in the area of iLottery, this B2C expansion in Italy, our willingness to potentially partner with other joint venture partners internationally, as we have done in Italy and Sao Paulo, and, you know, we are currently looking in other parts of the world.

So when you think about where we would potentially look to enhance what we believe is a strong opportunity for, like, you know, let us call it organic growth, but it is really product and geographical expansion that is built into our plan, which requires a significant amount of investment, and we expect a superior ROI, it would be in those particular areas.

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

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

We also obviously want to be mindful of the fact that we have significant commitments with respect to Lotto and other contracts that we need to take care of during the next few quarters. Thank you.

Vincent Sadusky: You know, I would just tie on to the buyback question. My sales pitch that I included in my script. You know, I think it is pretty incredible that there is such a meaningful disconnect between our intrinsic value and where our stock trades today. I know a lot of CEOs say that, but again, by every investor metric, whether it is EBITDA multiple, free cash flow yield, DCF, our valuation is below both direct lottery peers and comparable businesses, whether it is in gaming, travel, leisure, infrastructure-like businesses.

We increased our dividend, and now that is, at the current trading levels, more than 6% yield, which is far above levels typically associated with companies that have our level of stability and multiyear contract visibility and the resiliency of the business. So, you know, we have engaged actively in share buybacks, and to Max’s point, we continue to think through the allocation on a go-forward basis and we and our Board certainly take a long-term view towards value creation for this business.

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

James Hurley: Operator, the next question, please.

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

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

Vincent Sadusky: Yes. So the Brazil opportunity is significant. We had to invest a significant amount upfront in order to obtain the license. It was a deal that is, as I mentioned, pretty rare. There is not a lot of meaningful greenfield opportunities left around the world. Brazil has been a challenging place politically. It certainly had its ups and downs. We were confident that it met our risk profile after spending a lot of time doing the analysis and the work to understand the stability and the potential and the potential competitive threats in that market. Sao Paulo is the crown jewel of Brazil economically. People can afford to buy lottery tickets. It has got a terrific amount of activity.

The population really enjoys gaming and wagering. And this is, I think, an area that the government is very focused on and has done the right way, and has spent a lot of time in crafting the RFP and the potential bidder and bidder support. In fact, they already have the funds allocated for several hospitals in the area. So they have got a direct utilization of funds. And I think the public sees the direct benefit. In order to derisk both the financial commitment as well as the significant amount of operating start-up capital as well as intellectual property knowledge, we partnered up with Scientific Games on this venture.

And between the two of us, this is going to be an incredible effort, an incredible entrepreneurial effort to start this lottery from scratch. The points of sale have got to be built out. The implementation and installation of all of the machines across the state has an iLottery component. Both of us will be printing tickets and contributing tickets to the venture for scratch tickets and game development. And it is a very long-term contract as well. So we are excited about it. It will, as usual, we have got plenty of experience with this, as usual, it will take some time to generate meaningful cash flow, but we do think this can generate meaningful cash flow.

Because it is a fifty-fifty joint venture, we are excited about the cash flow potential. But, you know, this will be an entity that we will not consolidate.

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

Vincent Sadusky: Yes. That would be All-In acquiring PrizePicks. So, I think each company in the lottery space, there is not that many of us, have their own strategic imperative and strategic direction. And, of course, everybody thinks it is the right one. We think ours is right, given our many years of experience being a leader in the digital gaming space with our PlayDigital segment, as well as being a leader in the land-based gaming area with IGT. We decided over many, many years that those businesses did not have significant synergies and did not help us win any more lottery contracts, and were not leverageable into incremental consumer sales.

So we obviously reached a very different strategic conclusion from some of our competitors that have been active and more active in the M&A market and actually have been acquiring companies that are involved in the iGaming space, the iCasino space, the prediction markets. And we believe that is a completely different business. Now, they have their own strategic goals. Maybe that is a way to enhance growth even though it is not a good strategic fit. And then you also have the issue of geography, meaning many of these acquisitions that competitors made and the acquisition targets that are currently available do not overlap very well with our geographies.

So we just do not believe that the smart thing to do is to go out and pay very high multiples for a business that potentially could grow with the potential of higher growth than lottery, but is not a good strategic fit. Again, as I mentioned earlier, if you see us interested in anything, it would be in the area of enhancing our iLottery game development, enhancing our platform. We are now in the B2C business, specifically in Italy, and so that is interesting to us if there is a good overlap with a strong provider of games and consumers in Italy. But we believe very strongly that the greatest value creation comes organically.

And the fact is, we have built out an outstanding team in Italy to develop and deploy our iCasino and sports betting. We actually just on a limited basis started sports betting this week. We have had iCasino for a couple of months. We believe in the leverageable opportunity from the Lotto license in Italy that we can grow and build that business. We have been in that business before. We have been hard at work for many, many years on building out the best iLottery platform. Our games are now top performers in the world, in our game development studio for iLottery.

So it is, I guess, a long-winded answer to we are not interested in overpaying for things just to potentially enhance our growth that are not a good strategic fit. It would have to be a very strong strategic fit for us. Thank you.

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

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

If you can give us a feeling on the contribution from the two key geographies.

Vincent Sadusky: Okay. I will get started, and then I will hand it over to Max to help with the building blocks of growth. So on the Italy digital opportunity, we are primarily administering the B2C experience through our My Lotteries app. We have made really good progress with very little marketing. We have been putting together our marketing channels and opportunities. The great opportunity, of course, is the folks that we touch, roughly a million consumers a month, or we have over a million interactions a month in Italy with people checking their lottery tickets winnings, etcetera. So, you know, we have not begun a significant marketing effort so far through that channel and with our retailers.

But clearly, that is the opportunity. That all gets launched early this year. We recently hired a seasoned digital gaming executive, Victor Kukorian, to lead the business. You know, Victor has got great experience. We spent a lot of time together. You know, he has been with Flutter and Fortuna Entertainment Group and understands the opportunity to attract consumers and what it takes to have a competitive offering. So today, early days, it is possible you can play Lotto, you can play scratch and win games, you can play iCasino and skill games on our app, even though it has not been optimized.

You will see a product that is every bit as good as the established leaders in the market as the year progresses. But having said that, in fiscal year 2025, our iLottery wagers in Italy were up over 20% as a result of, I think, continued really good game delivery in the portfolio. Our active users have increased significantly, and, again, early days, but we have gained three incremental points of My Lotteries market share since we launched the My Lotteries app, this kind of first iteration of the app, back in early January with limited marketing.

So, yes, we are pretty excited about the long-term prospect and the opportunity for us to gain a reasonable share of the iCasino and sports betting market, which could, in our plan, result over the years in, I think, a meaningful contribution to our cash flow and profitability in Italy, and it naturally leverages our strength in operating the two largest lotteries in Italy. On the scratch and win front, we anticipate the process for scratch and win will be similar to Lotto where you have the law come out, then the RFP will be issued. Could happen at the end of this year. We are closely monitoring it, and we will see how things play out.

And, yes, obviously, we are very excited about the opportunity to extend our relationship with the state.

Massimiliano Chiara: In terms of the building blocks of the 2026 growth rate, I would say that we have the expectation for a couple of points coming from the core same-store sales, both in the retail lottery business. Probably a 1% on top coming from iLottery. Also, LMA, we expect LMA to be positive in the year, primarily in the first half. And then we have an initial contribution from the Italy B2C that is probably going to be in the range of 1% as well. Keep in mind, we have to complete the full circle of the UK transition started in August. That is going to be a headwind, obviously, on our top line.

And then we have a little bit of product sales increases as back loaded into Q4. We typically season out the product sales in the last quarter of the year. So, again, all growth engines are expected to start cranking up on the 5%, the three-year 5% CAGR that we have laid out with our 2028 plan already in 2026.

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

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

Massimiliano Chiara: Correct. Yes. So the $750 is perfectly comparable to the $730 that we achieved this year. Obviously, you have to take a little bit of after-tax EBITDA improvement into consideration. When we talk about interest and taxes, interest we have been able to optimize the interest expense with the $2,000,000,000 debt repayment. And we do not see a big increase coming yet in 2026 despite the fact that we will have to make the $1,000,000,000 payment in the second quarter. There is going to be a little bit of increase, but not significant. And then instead, we expect cash taxes to come down significantly. That is really our focus going forward, is on the cash taxes.

We paid more than $200,000,000 last year and expect to pay something in the range of $150,000,000 this year. There was some timing on Italy payments, about $20,000,000. And then, obviously, the incremental amortization upfront fee will depress a little bit earnings. And so that will be a positive for lower tax payment into 2026. And then we have a couple of other optimizations underway that will allow us to optimize that cash tax payment in that $150,000,000 range.

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

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

Vincent Sadusky: Thank you. Yes. So I would say on the expansion, US has been averaging one or two jurisdictions a year. This year, Massachusetts, part of the RFP that we won in Missouri, Kansas, Missouri, which our estimates are somewhere around 2026, will be implementing that iLottery system. You know, we have implemented iLottery on the draw side in Connecticut. We have implemented it in Tennessee recently. New Jersey is a state that will also go to iLottery draw from what I recall. We will be executing that as well. As far as new jurisdictions, it is difficult to tell. We did not see anything explicit in this legislative session across the US.

But we anticipate perhaps Colorado will be a state that will look to bid out its iLottery. So there is not a lot on the horizon, but I think at this continued pace of one or two a year, that seems directionally where it is going. For Brightstar Lottery in particular, you know, we have got a strong platform. I believe we have got more platforms deployed than any other iLottery company in the business.

So we continue to refine and strengthen our game recommendation engine, which has a lot of nifty AI tools incorporated in that, and we continue to work to improve and enhance things like game recommendations or, you know, what we used to call machine learning, but now AI-driven opportunities. And then certainly have talked in the past around game development. So we have been, with this current pace in North America of new jurisdictions putting out RFPs at this rate of one to two a year, focused a lot of attention on our content engine. We know that content from our PlayDigital iCasino experience is the area that builds credibility and reputation with our ultimate customers.

So we have had a lot of focus in that area. And we have had really good success for some of the markets where we do not operate the platform. We have had really good uptake of our games because our games perform. So the team, I would say, has done a really good job in the last year and a half or so of focusing on and delivering top-performing games that are desired in the iLottery markets by states where we do not have the platform. We think that is an exciting opportunity to continue to grow, in addition to continuing to pursue the platform opportunities.

And then finally, we have also talked in the past about the AI opportunity in game development. You know, when you find mechanics that work, and oftentimes the mechanics are, you know, there is a lot of work that goes into things like progressive games in particular that consumers really, really seem to enjoy. When you get a formula that works, to be able to leverage that into reskinning and slightly different look and feel of games allows you to increase the throughput and certainly bring down the cost.

We have had some games that have performed so well, we have essentially translated them into other languages and changed the odds and tweaked with the math necessary for compliance in various jurisdictions. But it is by and large the same game. So our focus has been very, very heavy in the iLottery space on continuing to make advancements to arguably have the best platform, have the best games. And then over time, we have been able to free up resources to be able to continue to develop better games across the world. And I think over time, we do not see that we have hit the maturity stage for iLottery. Fortunately, it continues to grow at a significant pace.

You know, over time, as you start to see the numbers get bigger, and the percentage growth slows down, I think we will have a more significant focus on taking out costs and reducing costs in the business. But right now, when we talk about investment in growth opportunities, clearly, iLottery is one of our top areas.

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

So, as we are in this heavy growth mode, we will continue to add contracts. And so the margin will gradually improve, but the full margin deployment will happen over time.

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

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

Operator: Apologize for that. Yep.

Vincent Sadusky: So just commenting first on Powerball. So the year-end run-up of Powerball was really great. The final jackpot ended up having the highest sales of any drawing since the first $2-plus billion jackpot all the way back in 2022. And the sales for the jackpot were nearly two times the sales of the last jackpot this size since October 2023. So we were very excited. It really confirmed our thesis when we look at the data over several decades that when there are multiple hits on the jackpot, you do indeed, from time to time, hit this jackpot fatigue syndrome.

And then when there is not a lot of jackpots for a while, the interest from the general public, once the jackpot gets up to a significant number, really picks up. So that to us was really reassuring to confirm the sustained appeal of the game. With regard to Mega Millions specifically, the build has been slower than anticipated with the changes that have been made. As you pointed out, the game just got changed less than a year ago. And the jackpot hit four times, which is way more than statistically expected. So it is difficult to make any inferences around the play level. We did see a jackpot near $1,000,000,000 finally.

And that jackpot did indeed grow slower than the $2 game, and we did not see a significant benefit from the occasional players that oftentimes come into the market and help to drive those jackpots once the jackpot becomes significant. So we continue to monitor it. And, you know, certainly, the committee that administers and is in charge of Mega Millions is very focused on it. And we feel like we need some time. We need to see where this run goes. Hopefully, knock on wood, this one continues to build.

And, you know, I know the committee, with our helping where we can around research, etcetera, is taking a look at an assessment of the performance to make a determination as to whether or not there are some recommended changes and tweaking to the jackpot funding. So I think we will see those things play out in 2026 as we have a larger body of knowledge from which to draw upon.

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

Joe Stauff: Thanks. Good morning, Vince. Good morning, Max. I wanted to come back to the Italian digital product offering. At least we think it is pretty significant sort of proof point for the stock, and just wondering, Vince, as you think about, say, the opportunity here, I assume, correct me if I am wrong, that the biggest opportunity is to certainly convert what is a retail sales lottery into a digital and therefore higher volume, and then two, iCasino. I guess, number one, is that, are those the most important inputs as you thought about the return and what you paid for the lottery renewal? That is the first question.

And then the second question is, how do we think about when you are really starting to gain traction in that digital channel, maybe on those components? Is that something in terms of KPIs or any information that you will be releasing going forward? Thank you.

Vincent Sadusky: Great. Thanks for the question. And Joe, I would agree with you. I do think a lot of the enhanced growth profile of the business and the valuation has to do with growth, and a significant growth lever or enhancer is the Italy digital opportunity. It will take some time to build up the unique consumers and both convert players who are primarily retail players. I think that is one of the greatest opportunities as we have built an incredible relationship and a lot of touch points through those retail players. And some of those retail players have digital activity. But it is fairly limited to things like checking tickets and scanning tickets from their phone.

So we think we have the ability to help promote and support movement of those people into more of a digital environment where they are actually purchasing iLottery tickets and, to a lesser extent, get them interested in playing iCasino games. The whole thought process around the iCasino games and to a lesser extent sports betting was to provide a fulsome entertainment experience for consumers in Italy. So they already love us for the lottery. They have built a relationship. I think our digital offering on iLottery, as witnessed by the share increase, is much improved and will continue to improve.

And our goal is to provide a digital platform that is best in class and frictionless and a really nice, fun experience. We are not there yet. That development is taking place in 2026. And then also, why allow the consumer to, or why give the consumer a reason to leave that app and have a second app to engage in iCasino games, and, again, to a lesser extent, sports betting? Why not provide all those games altogether in one app?

So, yes, your assessment is right in terms of the iLottery as the driver, and then we feel like we can pick up a decent amount of iCasino play, certainly nowhere near the leaders in the marketplace who are long established that have multiple brands. We do not have to in order to fulfill our long-range plan. And the same thinking around sports betting, like, why not also offer that in one place as well? We certainly will not be the leading sports betting platform. You know, that is a unique business. We do not have desires to, but again, really to offer players the convenience once they have established their wallets.

So if they choose to, they can do everything through the My Lotteries app. And I will hand it over to Max to talk about the KPIs.

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

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

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

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

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