Brightstar Lottery PLC (BRSL) Earnings Call Transcript & Summary

Hello, and welcome to IGT's 2021 Investor Day. I'm Jim Hurley, IGT's Senior Vice President of Investor Relations. We appreciate your joining us for this event. We've put together a great agenda where you'll hear about our long-term strategies, financial goals and capital allocation plans that are grounded in a framework to grow, innovate and optimize. Key highlights were included in the press release we issued earlier this morning. IGT's CEO, Marco Sala, and CFO, Max Chiara, will be joined by the leaders of our Global Lottery, Global Gaming and Digital & Betting segments. They'll be providing perspective on where we are today and more importantly, where we expect to go over the next few years. The materials being presented today will be made available for you to download at the beginning of each session. You can find them in the link provided at the top right side of the main presentation screen. There are 2 Q&A sessions today. We'll be taking questions from some participants via telephone and anyone watching the webcast can ask a question via the chat function that is also to the right of the main presentation screen. We do ask that you please focus your questions on the material that's already been presented. Today's event is being webcast live, and we are recording it. The webcast replay, along with the presentations, will be posted to the Investor Relations section of our corporate website. It's important to note that today's materials and discussions will include forward-looking statements within the meaning of the federal securities laws. These are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements based on a number of factors and uncertainties. You can find the summary of the principal risks and uncertainties that could cause our results to differ materially from our current expectations on the second page of the downloadable presentations and also in our SEC filings. Please take a moment to review the safe harbor statement. We will also be discussing some non-GAAP financial measures. Additional disclosures regarding these, including reconciliations with comparable GAAP measures are also included in the materials. And now to kick things off, some comments from IGT Chairperson, Lorenzo Pellicioli.

Hello. I am Lorenzo Pellicioli, Chairman of IGT. I'm happy to have the opportunity to speak to you today at this important event. As we all know, the last 2 years presented circumstances no one expected. The impact of the pandemic on the global Gaming industry was especially intense. IGT's management was swift to respond, making the safety and well-being of its people, customers and communities its top priorities. Business continuity plans were implemented quickly as well, action on cost and cash preservation. This was also done with a careful eye to protect structural elements that support long-term value creation. IGT's portfolio proved resilient. The diversity of its asset and broad geography reach helped the company navigate this period very well. Some important decisions were also implemented such as reorganizing by global product lines, disposing of noncore assets and optimizing the capital structure. There are many benefits to this action, including significant reduction in operating costs, debt and interest expenses, all contributing to the strong year-to-date results that were issued last week. And the company intends to build on this momentum with the long-term outlook it is providing today. I think you will find that it is a compelling long-range plan, and it has our full support. Top line growth is expected to accelerate, and margins are forecasted to expand by several hundred basis points, driving strong cash flow generation over the next several years. With that as a backdrop, we have spent a lot of time thinking about capital allocation. What you will see today is a well-balanced approach, [ the talos ] for important investment in the business, continue debt reduction and then asset return of capital to shareholders. The Board restated the quarterly cash dividend last week. That achievement was grounded in our confidence in the company financial condition and business outlook. We are reiterating that confidence with today's announcement of a share repurchase program. It is an important next step, and it is consistent with the company's natural evolution. Now I'd like to switch hat for a moment and offer some perspective as CEO of De Agostini, IGT's majority shareholder. De Agostini has been a long-time supporter of IGT and its predecessor companies. We first established a controlling stake in Lottomatica over 2 decades ago. Throughout this period, we have supported management growth and diversification plan. We are clearly long-term believers in the strong fundamentals of IGT's business. The steady growth profile, remarkable resilience and strong cash generation of the lottery and the potential to significantly improve the Gaming business aligns perfectly with our investment objectives. We also like the benefits of leveraging IGT's expertise and leadership in this area to seek emerging opportunities in the fast-growing iGaming and sports betting businesses. I want to be clear that De Agostini intends to remain the company's controlling shareholder for the foreseeable future. We see a lot of opportunity to create value here, and we have confidence in the management team. Their action over the last several years and especially the last 2 years, should help the market to appreciate the intrinsic value of this unique portfolio of assets. On behalf of the IGT Board, we appreciate your interest in the company. I hope you find today's presentation to be informative and therefore in appreciating IGT's exciting future. Thank you for listening, and I hope you will enjoy the presentation. [Presentation]

Good morning, and welcome. It is a pleasure to be with you today. Thank you for joining us. Our intent is to provide the information you need to get a perspective on why we firmly believe that IGT has a solid future of growth and opportunity. For some of you, today is a reintroduction to IGT. We have significantly evolved, simplified our story and streamlined the business. We have a clear strategy focused on growth and value creation. You will also meet a senior management team that 18 months ago faced enormous challenges to our business. The pandemic caused an upheaval in our markets, many of which were shut down. We needed to take quick and decisive action and we did. Our strong financial relationships gave us the flexibility to respond. Investments and expenditures were closely managed to ensure we met our commitments and preserved cash. Furloughs were instituted for 70% of our employees, and the salaries of all those who remained were reduced. All of this was accomplished while we made certain to service our customers' needs and remarkably, the team was able to execute on strategic priorities to streamline and reorganize the business. It was an incredible period in our company's history. There were lots of sacrifices and challenges to overcome. But here we are today, in a very good place, much stronger for the experience and well positioned for the future. So welcome, and let's begin. There are 4 key messages that I want you to take away today. Over the past 2 years, we have built a solid foundation and are well positioned for profitable growth. We proactively managed our way through the pandemic, streamlined our business on leveraging on our core competencies and remained focused on our strategic priorities. We are leveraging our industry-leading innovative content and solution to drive revenue growth and margin expansion across all businesses. The diversity of our portfolio provides balance, scale and opportunity to grow. We are confident in our ability to deliver a compelling and achievable set of financial objectives throughout 2025. We will continue a disciplined capital allocation strategy to maximize value for all stakeholders. Finally, we have a well-established track record of delivering on our commitments. I hope you will find that this is a story of growth and opportunity. I'd like to first give you a sense of the vision, mission and strategy that motivates us. Our vision is simple: We want to drive the global Gaming industry to greater player engagement and responsible management. Our industry leadership is built on a legacy of innovation and trust. That remains at our core and in our DNA. Our mission is to consolidate our position of global leadership in the regulated Gaming industry by offering best-in-class content, services and solutions. That is the foundation of our strategy to grow top line and margins across all segments while increasing operational efficiency and optimizing capital allocation. It is a straightforward formula for success. And during the remainder of the day, my colleagues and I are going to tell you how we will achieve it. Let me start with an overview of who we are. We are the leading in B2B global Gaming. For comparison purposes, we are using 2019 as a reference point as the last full normalized year. We are showing year-to-date '21 as a more current reference point. As you can see, we have a balanced revenue profile with the largest (sic) [ larger ] share coming from lottery than Gaming. Digital & Betting presence is increasing rapidly and represents tremendous growth opportunities. We derive most of our revenue from North America and Italy. Recurring service revenues account for over 75% of our total. The diversity of these revenue streams provide a natural edge and balance from fluctuations in a single segment or region. Our B2B capabilities are extensive. For lottery, we offer a comprehensive set of solutions, primarily based on a facility management model that provides us a percentage of sales on all wagers process throughout our systems. Based on specific regulations, we also directly manage the lottery operations in jurisdictions such as in Italy, Indiana and New Jersey, where we can generate greater returns. It also gives us a direct player contact. This is very valuable, and we use the knowledge and the experience gained to help all of our customers to improve and grow. We also have a state-of-the-art instant ticket printing operation that serves a broader set of lottery customers, not just the ones where we provide technology. In Gaming, we have one of the industry's largest content libraries and IP portfolios that we deploy over a wide array of Gaming machines and specialty products. Systems are an area in which we excel. And our cashless solutions are quickly becoming industry standards. In the Digital & Betting space, we have proven content that we import from our Gaming machines into the digital casino world. Our sports betting system is a one-stop shop for all components that can provide scalable, complete platforms and solutions for land-based retail and mobile. Our customers fall into 2 buckets: commercial operators and government entities. Our government relations and compliance operations are important differentiators. Most notably, we are licensed everywhere and have the expertise to navigate all jurisdictions. We managed through the pandemic well by sticking to a simple formula: protect our people, service our customers, react to what we know, don't be distracted by unknowns and continue to aggressively pursue strategic priorities. Simple to say, much harder to do but we succeeded against unprecedented disruptions. We drove an accelerated recovery from the pandemic and instituted significant business and operational efficiencies. That helped us to achieve a meaningful full margin expansion, established a solid foundation to build on. Our efforts to deleverage the business have produced impressive results, and that trend continues. We repositioned our Digital & Betting activities creating a separate segment to highlight and support the high-growth business. Year-to-date revenue in North America is more than double 2019 levels. In addition, a legal entity and organizational realignment of the Digital & Betting segment is underway to support the evaluation of a potential separate public listing of the business. As we reorganized, we divested the B2C Italian Gaming business and used the proceeds to pay down debt. We also refocused our Gaming portfolio to high-growth product segments and geographies. And as anticipated, we are making capital investments to achieve and maintain leadership in the fast-growing areas of iLottery, iGaming and sports betting. It was a remarkable period of achievement for us. Now it's time to look ahead. To begin, we have global leadership in larger markets with secular tailwinds and accelerating digital growth. We have also a diverse and resilient portfolio that matches well with attractive end markets. That aligns well with our unique and sustainable competitive advantages, including a strong management team with extensive industry experience. We have focused the business on a strategy to grow, innovate and optimize. This enables us to set aggressive but achievable financial goals. And we have a disciplined capital allocation strategy to maximize value for all stakeholders. Now I'd like to give you some perspective on each of these themes. The growth opportunities in the primary markets in which we operate remain very strong. It is estimated that between 2019 and 2025, U.S., Canada, Europe and the Latin American markets will experience a healthy 4% to 5% CAGR, exceeding that of the previous decade. Strong secular trends will continue to be part of that growth as the need for governments to find new sources of revenue is going on. Also, there has been a greater acceptance of Gaming and digital platforms, which means governments can access new expansion opportunities with little community resistance. The digital transformation is rapidly impacting player preferences. It is much more accessible and allows for easy management and regulation. And most importantly, it's creating incremental play with little or no cannibalization of other games. It is expected that the percentage of the online wagering will exceed 20% by 2025, and that will drive significant incremental and highly profitable growth for our business. IGT's leading position in all categories is well established. Our strong market presence aligns well with high-growth areas. IGT is by far leader in the Global Lottery segment with over 75% U.S. market share and more than 90% share in Italy. We also are a leader in the fast-growing U.S. iLottery space. In Gaming, we have achieved leadership positions in North American terminal revenue and international terminal sales as well as global systems. And in iGaming, we are the top provider for proprietary content in North America, and IGT is one of the top land-based sports betting platforms in the U.S. Now let me focus on IGT's portfolio and processes that drive significant operating advantages. Diversification and resilience creates a natural edge in variability across segments. When Gaming was shut down, lottery and digital thrived. The rollout of the Wheel of Fortune game across all our verticals is a prime example of maximizing content synergies. From gaming machines to instant ticket to digital, players respond to brands, teams and game dynamics. As has happened in North America, Italy and with some international customers, IGT is a trusted partner that can help customers expand in new categories. Our advancements in technology platforms provide benefits that allow customers to efficiently manage their operations and provide seamless player engagement with any vertical. And we are leveraging lean manufacturing processes to achieve economies of scale. And the competitive advantages built over time are sustainable. I will highlight a few of them. We are known for our play-centric mindset and ability to drive player engagement and help customers to manage their businesses more efficiently. We also have a leading R&D spend to drive innovation and high-quality extensive content library developed and delivered by a strong creative team. We have a complete one-stop shop offering of products and solutions, which is an important factor with many customers, particularly governments. Our strong government relations team is skilled in licensing and regulation, which is a major advantage as new markets open and existing markets expand. Now let me share some insights into our strategy going forward. We are focused on profitable growth with strong cash flow and returns in all our business segments. Our efforts are best characterized by 3 strategic pillars: grow, innovate and optimize. Our objective is to grow IGT's top line and margins by leveraging innovation on content and solution, enhancing operational efficiency and diligent capital allocation. Let me explain what that means in practical terms for each business. For lottery, we expect to deliver top line growth by investing in technology and products to drive same-store sales growth from an expanded base and player spend established during the pandemic. Winning market share in instant ticket services and delivering above-market iLottery growth. For Gaming, we will drive growth and increased profits through growth in our North American core market share and maintaining a VLT leadership in upcoming replacement cycles; progressively growing our global installed base and expanding in underpenetrated product verticals and geographies. For Digital & Betting, we will maintain market leadership in high growth markets, through being partner of choice in new markets opening, building on our long-term partnerships and allocating their capital to support growth. Overall, we will continue to evaluate strategic opportunities to further align our portfolio to high-growth areas. We have a strong pipeline of innovation to support customer success by enhancing player experience and driving player engagement. We also provide a comprehensive set of solutions to help customers operate more efficiently and effectively. Some of our innovations are highlighted, and you will learn more about these from the leaders of each segment. Let's turn now to how we will optimize and achieve better portfolio efficiency and higher margins. We have implemented programs in the areas of supply chain improvement, product margin enhancement and operational excellence. We have made good progress, and the results of these efforts will be a significant improvement in the operating income margins by 2025. We have set some aggressive financial goals for the next 5 years. That represents our strong commitment to growth. We expect to achieve mid-single-digit organic revenue growth, mid-teens operating income CAGR, approximately $4 billion in cash from operations with approximately $2.4 billion of free cash flow generation. Max will give you some more detailed insights into this later. Our capital allocation plans include supporting our entire portfolio with the resources to maintain our leadership with emphasis on the fast-growing Digital & Betting and iLottery activities. We expect to further delever and remain within a 2.5 to 3.5x leverage range across all investment cycles. We recently reinstated our quarterly cash dividend, a $170 million annualized investment. And finally, we have established a $300 million share repurchase program. This is something many investors have asked for. Now that leverage is in a comfortable place, the time is right for us to do so. Our team has the experience, confidence and respect of the gaming industry and a track record of delivering on our priorities. They successfully managed the challenges over the past 18 months. The truest measure of their success during this time was their ability to transform our business by advancing our strategic priorities. We are stronger and ready to capitalize on the many opportunities in front of us. ESG policies are at the forefront of our business priorities. For us, it is a simple way of life. We have been involved in the sustainability movement for over 15 years and issuing an independently audited sustainability report since 2008. Our program has been widely recognized by leading ESG advocacy organizations and investor rating groups. Equally important we have a well-established diversity and inclusion program. Our commitment is that everyone be accepted and welcomed. To that end, we have instituted D&I objectives for the senior leadership team for 2022 and made those metrics part of our compensation system. Our efforts have been recognized by our industry and our customers, who often call on our D&I team to help them to establish similar programs. We as leaders recognize that sustainable companies that celebrate the diversity of their workforce simply do better and succeed for all stakeholders. As I conclude, I'd like to reiterate our key messages. We have built a solid foundation for profitable growth. We will leverage industry-leading, innovative content and solutions to drive revenue growth and margin expansion across all businesses. We are committed to delivering a compelling and achievable set of financial objectives through 2020. We will continue a disciplined capital allocation strategy that invest through cycle while maintaining leverage ratios in the 2.5 to 3.5x range. Finally, there is a great team leading this company and its 11,000 employees. Companies are primary about people, and what they can achieve given the right resources and leadership. You are about to hear from some of them. They are dedicated to our success, have consistently delivered results and are committed to our future. And now I'm happy to turn the program over to Fabio Cairoli, CEO of Global Lottery. Thank you very much for listening.

Thank you, Marco. Hello, and welcome to world of lottery. I am Fabio Cairoli, CEO for the IGT Global Lottery business segment. Let me begin by telling you a little bit about myself. I joined IGT in 2012 and eventually was appointed CEO of all our lines of business in Italy back when we were organized by geographies. That means, of course, that I had the privilege of running the largest lottery in the world. Hopefully, that gives you a sense of the experience I bring to my current role. When I'm facing a customer, they know that I can appreciate the challenges they have as an operator and know how to help them to succeed. And in a very real sense, I was an IGT customer internally but nonetheless a customer and a very large one. That's another attribute I have in common with our customers. I know the power behind IGT's solutions and how they can help lotteries to grow. I'm joined today by Jay Gendron, Chief Operating Officer of IGT Global Lottery. Jay has been with IGT and its predecessor companies for over 25 years. He knows the lottery industry inside and out, is trusted and respected by our customers who have voted him into the Lottery Industry Hall of Fame. Most importantly, our customers and employees know that when they have a problem or need advice, Jay is the guy to go to. I will say that there isn't anybody in our industry more knowledgeable than Jay. So with Jay, I'm excited to give you some perspective on the IGT Lottery business and how it will contribute to the company's growth. As I walk you through this presentation, I want to impress upon you 5 major things. The lottery category is delivering accelerated growth through innovation and elevated player consumption. There's some stuff happening with lottery at IGT and players are responding. We have a sustainable market leadership, grounded in competitive advantages, a proven track record and strong customer partnerships. Let me put it plainly, IGT is lottery. We define the category across the globe. We are well-positioned to capture all growth opportunities since we are present in all industry segments, and we have a recurring revenue model perfectly aligned with our customer growth. You can be assured that we will make investment to capitalize on multiple focused growth initiatives while maintaining an attractive margin profile. You will see that there are some interesting opportunities, particularly in iLottery. We are committed to delivering a mid-single-digit revenue CAGR and 500 basis points of operating margin expansion compared to pre-pandemic levels. That's meaningful growth and significant margin improvement for a business of this scale that already has an attractive margin profile. As I stated earlier, we are by far the market leader in the global lottery space. In 2019, we achieved $2.3 billion in revenues with an operating margin of 30% and an adjusted EBITDA margin of 50%. And as you will see later on, we are expecting our 2021 estimate to hit about $2.8 billion. We enjoy significant market share with over 90% in Italy and about 75% in the U.S. And we have 85 customers around the globe, including the largest and most successful lotteries. Our revenue mix is well balanced by geography and game types. As you can see, we have strong leadership positions in the U.S. and Italy, and that is reflected in our revenue mix. As to game mix, currently instants are our leading source of revenues at 54%, with draw games at 41%. We have a solid and profitable business model with more than 90% of revenues being recurring and perfectly aligned with market growth opportunities. Our revenue model, combined with focus and operational excellence in supporting solid and high-level profitability. From a market perspective, the message is straightforward, lottery is growing at an accelerated pace. Historically, the lottery market has proven resilient even during times of crisis. Lotteries have delivered steady, low single-digit growth, sustained primarily by innovation and regulation. Even the disruption caused by the pandemic has proven positive for lottery. As Gaming and leisure alternatives were less available, players increased their average consumption and new players enter the category. In both cases, they enjoy the experience, which has fueled the extraordinary growth that we are experiencing in 2021. Further, a stronger engagement with lottery products has been established. From our experience, the in-depth player research we have conducted and extensive customer feedback, we expect the increased average consumption to represent a new higher baseline for continued growth in the coming years. And iLottery adoption is growing at much higher rate based on player demand, innovation and new regulation. These dynamics have stepped up the size of the market, and are driving an improvement in the growth profile from low to mid-single digit. I like this chart because it summarizes very well why we have been able to achieve and sustain our industry leadership. IGT is grounded by well-recognized strengths and advantages. Let me begin with our people. We have a highly competent, talented and passionate team that is recognized by the entire industry. We support our customer growth through an unparalleled player knowledge base built on comprehensive global insight. Our capability to manage end-to-end lottery operations help us better relate to our customers' challenges and needs. And we have a unique sales development team that is focused on designing tailormade games and solutions specific to individual customers. We support innovation and growth through an industry-leading R&D spend. Our solution, products, value-added services are recognized as best-in-class and utilized by the majority of lottery operators globally. And we have recognized capability in government relationship that is extremely relevant in a highly regulated market. I think it is fair to say that if you were to ask any of the largest and most successful lotteries in the world who they rely on for advice and support, they would name someone on this page. Our leadership team that has achieved outstanding results and is laser focused on our growth programs. And now I'm going to turn the presentation over to Jay.

Thank you, Fabio, and hello to you all. As Fabio said, we have a leading global footprint. Even more importantly, we compete in all market segments, providing us with the entire spectrum of growth opportunities and unique and comprehensive market knowledge. Far and away, we are the leader in the so-called facilities management segment. Under this arrangement, we partner with our customers in supporting their lottery operations for a percentage participation fee that generates the vast majority of our reoccurring revenues. We have 32 facilities management customers globally, and our systems and solutions are used by 8 out of the top 10 largest lotteries globally. We also have unique and proven capabilities as a lottery operator from our experience in Italy, North America and Latin America, where we manage lottery operations end-to-end. This is also a reoccurring revenue model business. We are a recognized and growing player in the production and supply of instant tickets, serving 44 customers globally and offering our best-in-class production facilities, market knowledge and innovation capabilities. We've invested in this area and it's showing great results. We have a major and growing presence in the emerging and fast-growing global iLottery segment with 8 lotteries utilizing our platform and products. We have built a solid platform for future growth in an area that many lotteries are intending to enter in the near future. By being the market leader in the Facilities Management segment we align and help drive our customers' sales growth, and that generates reoccurring revenues across the entire spectrum of lottery games, including instants, draw and jackpots. I want to highlight that point. If a wager, regardless of the game category or supplier, is processed through our system, we get a percentage fee. So we participate in any growth in any category of game. Within the facilities management contract and scope, we serve our customers with complete technology solutions such as our Aurora platform, point-of-sales terminals and a communications network that are at the heart of lottery operations. In addition, we offer value-added services and solutions to support sales growth. We are able to build strong partnerships with our customers because of the talent of our people and the superior quality of our products and solutions. We grow and work with them side-by-side each day. To understand our position in the lottery world, it is important to appreciate the power of incumbency. The average duration of our customer relationships is 30 years. It has proven to be a very reliable predictor of contract renewals. Historically, we have been successful in converting 100% of top 10 incumbent rebids. And we are entering a favorable contract renewal cycle resulting in highly predictable revenue and moderating capital intensity when compared with the past 5 years. Our portfolio of top 10 contracts has an average duration of 14 years, and we enjoy an average of 6 years before the next rebid cycle for both top 10 and the entire portfolio. Now I'll turn it back to Fabio.

Looking forward, we have well-identified strategies that are focused on long-term growth and value creation, building around the pillars of growth, innovation and optimization. We will grow by continuing to support our customers' sales growth, the accelerated development of iLottery and an increased market share in instant ticket services. Looking at innovation, we will deploy market-leading game strategies, develop expansive retail solutions and provide unique player knowledge to our customers. As to optimization, we intend to leverage technology evolution to gain system efficiencies and add greater services. As noted, we have industry-unique innovation capabilities. Lottery is an exciting category, and there's a lot that can be done to drive growth and increase player engagement. Our superior player knowledge is an asset that is highly valued by our customers. And our sales development team help customers to introduce innovation across the entire spectrum of games. We also have proven game evolution programs. There are several opportunities in the pipeline with more to come. Again, we are deeply engaged in these areas because our customers expect and demand that we use our worldwide expertise and experience to help them grow. And I will continue to highlight that their growth translates into recurring revenues for us. We continue to push to retail innovation to support sales growth by adapting to evolving player behaviors and needs. We have programs to digitize the player experience, evolve our terminals and provide a full set of mobile applications. This will also represent the base for a retail-to-digital omni-channel strategy with our FM customers. We are expanding our retail footprint and solutions, leveraging our self-service leadership and deploying very promising in-lane solutions favored by larger retailers. We also offer our customers the full set of products and solutions to improve lottery store visibility and retail operational excellence. Now I'd like to turn to one of the most exciting areas, iLottery. Almost universally, lotteries are exploring what role they are going to play in this fast-moving segment. Several U.S. jurisdictions are expected to go live in the next 5 years. They are showing great interest because it is one of the most attractive incremental growth engines available to them. A quick look at the attributes and drivers of iLottery give you a good insight as to why it makes great sense for lottery adoption. To begin, the player base is expanding on both convenience and increased consumption opportunities. Further, the average consumption is growing through innovation. The pandemic retail lockdown provided a major structural acceleration, and we are observing a continued momentum in the trend even after the reopening of the retail. This is also driving increased regulatory acceptance. Content evolution, which involves the customization of games to the digital format, is driving a more rewarding player experience, and there is a progressive adoption of best practices. All in all, we expect double-digit growth in iLottery driven by the U.S., definitely a top priority and focus for us. We have plans and investments to push this strategic growth opportunity. We are leveraging our FM relationship, best-in-class technology and broad content library to accelerate adoption by our customers. We will also expand our footprint, support stronger growth with existing iLottery customers and improve our overall presence. We have developed a state-of-the-art new platform with stronger capabilities and features to support all player-driven growth opportunities. Most notably, we have a reference site in Georgia, one of the largest and most respected lotteries. They have launched a new platform in Augusta, and are live and growing quickly. It is the first-to-market cloud solution that operates our eInstant RGS. Further, we are accelerating the expansion of our library of eInstant with recent launches proving to be strong offerings. And we are putting our global player knowledge and experience to work to help drive quality and strengthen throughput capacity. We also have the ability to work with our FM customers to develop omni-channel solutions, thus strengthening our position to help them expand from retail to iLottery. And we have customer adoption programs to support their launch into iLottery games. We consider this major improvement as a sound platform to drive our customers' growth and expand our footprint and market share. Based on our presence and strong relationship, we are anticipating double-digit growth even above the current market outlook. Simply iLottery is a major strategic priority to us. Within the instant ticket production and supply, we are growing, and we have proven programs to further improve our market share. By investing in this segment in recent years, particularly in production capabilities and innovation, we have built a solid market position, and we have a full lineup of innovative products that will be strengthened even further by the launch of our exclusive and patented digital printing technology known as Infinity. Moreover, we have a very favorable customer renewal cycle with several opportunities to expand our presence and grow share. We are targeting high single-digit growth and market share improvement. Finally, we will leverage major evolutions in technology to further improve our solutions. With our long-term relationship comes a concern from customers that they stay abreast of technology advancement. Our commitment is to future-proof customers by making certain that we embrace the latest and greatest development. In that regard, we are focusing efforts and investment on cloud development and adoption iLottery. We are first in the market with a cloud-based eInstant platform that has been deployed in Georgia and Kentucky with further deployments anticipated with our customers in U.S. and EMEA. We are investing to be ready to offer our customers cloud-based solutions on the entire spectrum of our portfolio of products and services, both land-based and iLottery. The benefits from our cloud initiatives are clear: customers gain faster time to market and scalable operational efficiencies. It's another exciting area that holds significant promise for IGT to optimize its offerings and operations. Capitalizing on our track record and building on our programs, we have raised our growth profile from the historical low-single-digit to mid-single-digit. We expect to incorporate the recent growth acceleration and will continue to deliver growth over the next years. Revenue growth, combined with continued operational excellence and our strong operating leverage will drive further profitability improvement, resulting in a 500-basis point margin improvement. And a favorable rebid cycle will result in moderating capital intensity when compared to the past 5 years. That will, in turn, support continued strong cash generation and allow for sustained investment to fund growth. So let me recap for you why lotteries are a critical part of the IGT story. The lottery category is delivering accelerated growth through innovation, increased player engagement and operational excellence. We have a sustainable market leadership, grounded in competitive advantages, proven track record and strong customer partnership. We are well positioned to capture all growth opportunities since we are present in all industry segments, and we have a recurring revenue model perfectly aligned with our customers' growth. You can be assured that we will make investments to capitalize on multiple focused growth initiatives while maintaining an attractive margin profile. We are committed to delivering a mid-single-digit revenue CAGR, and 500 basis points of operating margin expansion compared to pre-pandemic levels. Simply, in a growing category, we are leveraging our leading position and investing in well-identified growth programs to consolidate and deliver accelerated and profitable growth. And we are having fun doing it. And remember, as our customers would remind you, you cannot win if you do not play. So buy your tickets today. On behalf of Jay and our entire lottery business team, I thank you for listening. Now it's time to hear from my colleague, Renato Ascoli, about IGT's Global Gaming segments.

Thank you, Fabio. Good morning, everyone. My name is Renato Ascoli, IGT Lottomatica, GTECH, IGT veteran with experience spanning from B2C operations in Italy; lottery, globally; and Gaming, also globally, currently the CEO for Global Gaming. Today, I'm going to present an overview of how we view the global gaming market, our performance in the market what sets us apart from our competition and the overall outlook for the business. But before I begin, let me offer a few personal observations. It was really wonderful to see those of you that visited with us at G2E. The show was full of people, energy and excitement that drives the Gaming industry. Let's face it, there's something about seeing our customers face-to-face, which was a real motivator for our team. You could also not help but to be impressed with the action on the casino floors in Las Vegas. Having visited with many customers, I can tell you that it's not just Vegas that is booming. The North America Gaming market has come back strongly with both regional and destination markets doing very well. After going through all the pandemic challenges, it's really exciting to be part of the industry today. With that aside, let's get started. There are 5 messages I'm hoping you will take away from this morning. Firstly, we operate in a large and attractive industry that has shown its resilience during this pandemic and is on a solid path to recovery. The momentum is almost tangible. Secondly, IGT has an unviable diversified product portfolio and a leading market acquisition in almost all of the product verticals where we compete. Third, we have a very experienced and seasoned leadership team. Next, we have a clear strategy to grow our business that will deliver not only impressive revenue growth but also higher margins. And finally, we are confident in our ability to achieve a revenue CAGR of over 10% and significant margin expansion over the next 4 years. All in all, the market is roaring back. We have got the products that customers want, and we have a plan for profitable growth. For ease of comparison, the financial numbers I'm showing you here are 2019 reported numbers. Our pre-pandemic Global Gaming revenues were $1.6 billion, 70% were generated in North America and the rest from our international operations. Our revenues were nicely balanced and evenly split between product sales and service revenues. We also had one of the largest installed bases of leased machines with approximately 70% of them in North America. In 2019, we reported an adjusted EBITDA margin of 26%. And as I will discuss later, we do expect to be able to grow our overall margins. Finally, we have over 4,400 talented and experienced employees dedicated to our Gaming business around the world. Based on our estimates, we believe the total pre-pandemic Global Gaming B2B market to be around $8 billion, with North America making up close to 60% of the overall market. We believe and are forecasting that the B2B market will return to pre-pandemic levels between 2023 and 2024. As I said earlier, the successful path forward is becoming more and more evident. On this slide, we are indicating what our pre-pandemic estimated share of revenue was for each of our main regional markets. In both North America and Latin America, our share of revenue was approximately 25%. In North America, IGT has consistently outsold the competition in terms of unit shipments in 2019, in 2020 and year-to-date in 2021. In simple terms, nobody has sold more Gaming machines in North America than IGT. As you can see at the bottom of this slide, we have a very strong position in each product vertical. We are very proud that in poker; video lottery terminal sales, which you will hear us referred to as VLTs; the central determinant market (sic) [ central determination system ] of Washington State; and the lottery participation markets of New York, Rhode Island and Delaware, we are clearly #1. In all other product verticals, we are in the top 3. As promised, I wanted to highlight some of the areas where I believe IGT has important competitor advantages. Firstly, we pride ourselves on taking a player-centric view on developing content including engaging players to get their feedback on games during the actual design and development process. We are also the first to implement a disciplined and structured test bank program. That seems like a simple thing, but it is powerful. In fact, almost all of our core and MLP games go through the test bank process and they must pass the test before they are released for sale in the market. This means our customers, casinos, can have confidence that the games they are purchasing are games and will work on their floors. Secondly, IGT has a long and successful history of innovation in games, systems and hardware that led us to our third long-lasting competitive advantage, a comprehensive and impressive portfolio of both games and solutions and, of course, the intellectual property portfolio, which goes along with it. Fourthly, we have the best-in-class cashless and payment solutions in the industry. Let me assure you, IGT is the only company offering a fully integrated cashless solution. We will walk you through this shortly. Next, we pride ourselves to be one of the few companies in the industry to have a diversified global studio footprint. Finally, we also have a leadership team with deep industry experience and knowledge, and we are in licensed and regulated in an impressive number of jurisdiction and gaming verticals, many of which have high barriers to entry. Our success in each of the verticals I previously mentioned, comes down to ensuring we have the absolutely right content and solutions. This, of course, means we need to make sure we have the world-class creative organization. Today, IGT's creative teams that produce industry-leading content are located across the globe in 5 centers of excellence. In Moncton, Canada, our teams are focused on video lottery terminal content. Our center in Belgrade, Serbia is focused on developing content for the Eastern European markets. In Reno and Las Vegas, our creative teams are focused on poker, mechanical wheel and premium product content. In our Graz location in Austria, our teams are predominantly focused on core product content. Finally, our studios in Sydney and Beijing are focused on content for our Asia Pacific markets. As you can see from the data points on the slide, our creative leadership team are very experienced, and we are proud of both the diversity and the achievements of this team. We have also enjoyed significant success, evidenced by the number of games that over the last 2.5 years have been identified by independent third-party researchers as top-performing titles in the marketplace. Let me just say that everyone talks about how wonderful their creative teams are. In the end, it's about results, and our team is delivering on the promise. And here are just some of the strong performing content we have in each of the major gaming verticals. The content we have in each is attuned to specific market needs and requirements. In premium, we are proud of our success with the Wheel of Fortune. In fact, we have just celebrated our 25th anniversary with a Wheel of Fortune, which is without a doubt the most popular and successful casinos' slot brand of all time in North America. In fact, over those 25 years, we have created close to 250 different Wheel of Fortune titles. In core, we have also enjoyed a lot of success with groundbreaking innovation and game mechanics that we have deployed in games like Scarab and Regal Riches. In video lottery terminals, we really are a powerhouse. From a content perspective, we are #1 in almost every North America VLT market we operate in. In the central terminal market of Washington State, we are the clear leader in terms of content with games like Triple Fortune Dragon. We have recently increased our focus on Class II as this is a key growth opportunity for us given we have a relatively small share. I wanted to provide you an overview of the leadership team we have in Global Gaming. This team is nicely diversified and has a global perspective with a good handle of the emerging geographies. And importantly, the combined team has over 230 years of industry experience. Now I want to talk about our strategy for growing both our revenues and profitability. All of our initiatives can be grouped in 1 of 3 strategic pillars. In terms of growth, we are focused on expanding our presence in the core video market in North America. We are also intensely focused on improving our multilevel progressive offerings in both product sales and recurring revenue markets. Those of you who came to G2E may have noticed the number of new multilevel links we were displaying. Customer reaction was universally very positive. This type of game play is very popular in not only the North American market, but also in some of our international markets. And it's the reason why we have significantly increased our investment in this area. We are also working diligently on regaining our leadership position in mechanical reels, and we unveiled at G2E, our new Mechanical Reel cabinet and associated content library which will be available in early Q2 2022. Increasing our share in a number of underpenetrated niche markets, like Class II electronic table games and Eastern Europe, is a high priority for us. And we also believe we have an opportunity to expand our system footprint. We are also ready to take advantage of the upcoming Canadian VLT replacement cycle and new operator market openings. Innovation is key to our efforts. The various growth initiatives I just talked about, including developing best-in-class new cabinets, like DiamondRS, or continue to introduce new innovative game features like we did with Scarab and Regal Riches. And of course, continuing to upgrade our best-in-class system solutions are all driven by innovation. We are also looking to tap into additional revenue streams from payments in our sizable IP portfolio. The optimized pillar includes the actions we have already taken as part of the previously announced OPtiMa program to help drive overall margin improvement. You have seen some benefits already in our year-to-date profit profile. Now I would like to hand over to Nick Khin, our CEO for Global Gaming, to talk more about these initiatives. Nick has over 20 years of experience in the industry, including the last 8 years at IGT and provides deep knowledge and experience with both North America and international markets. Most importantly, is highly respected by our customers.

Thank you, Renato, and hello, and good morning, everyone. As Renato mentioned, we're committed to growing our overall share of the core video market. We've already been able to achieve sizable market share growth. And since 2016, we've enjoyed an 8-percentage point improvement. Being able to continue to grow in this area requires us to come out with best-in-class hardware and content. Our recent new cabinets released into the market, the Peak32 and the PeakSlant49 were recently highlighted as the highest performing cabinets in their relevant categories. Coming out with new innovative hardware, like the 2 cabinets I just talked about, combined with higher performing content has allowed us to increase our average selling prices in the core video market. In fact, we've achieved a 20% uplift in ASPs since 2016. Renato also briefly mentioned the test bank program, and this really does set us apart from the competition. All of our core video titles are tested in the marketplace and must pass that test before they're released to our customers. This gives our customers confidence that the titles they are purchasing from us will perform on their floors. The bottom line here is that strong cabinets, combined with strong performing content, will help us continue to grow our share of this important market and overall ASPs. Our focus on multilevel progressive type content is also key to us growing our share in both core video and premium. I'm going to refer to multilevel progressives as MLPs. MLPs are games that are linked together within a casino that offer players the ability to win different levels of jackpots. The graph on the slide gives you a breakdown of our North America recurring revenue installed base between MLP type product and non-MLP product. As you can see, over the last several quarters, we have been successful in growing our MLP presence, thanks to new content. This growth in MLP has helped us offset the removal from the installed base of old and unsupported low-yielding units. Net of some specific and well-known dynamics in Delaware, New York and Rhode Island, we anticipate stabilizing our global installed base. Future growth in the global installed base will derive mostly from our international markets. Our overall North American yields from our recurring revenue units has also been helped by the delivery of new MLP content. Finally, the chart on the right-hand side of the slide is just a selection of some of our superstars in the marketplace today. Our wide area progressives, like Wheel of Fortune Gold Spins and Megabucks consistently perform at impressive levels. In fact, as you can see, they're averaging between 2.5x and 3x floor average. The other games you see on this chart are some of our recent multilevel progressive games that have helped us increase our overall share of the MLP market. G2E took place a few weeks ago, and we had a strong showing. In terms of new form factors, we displayed a brand-new mechanical real cabinet for the first time in 7 years. This new cabinet that we call the DiamondRS, together with its library of games, is what we believe is going to help us regain our leadership position in this area. Significant research and development has gone into the design of this cabinet as we wanted to make sure the cabinet met the needs of the mechanical real player. The DiamondRS is a nice blend between the traditional look and feel of the mechanical reel cabinet with some very impressive technology, such as the use of new fully transparent LCD screens. We've also brought back a number of our legendary mechanical reel titles, such as top dollar, which are only available on this new cabinet. A brand new premium cabinet was unveiled that we call the Peak65. The Peak65 cabinet will host a number of brand-new wide area progressive games, including the Wheel of Fortune and Price is Right titles. In terms of games, we showed an impressive lineup of MLPs. In fact, this was recognized by our customers. A total of 18 different MLP links were introduced, a record for us. A good lineup of non-MLP core video content, including a game called Stinkin' Rich, is already being reported in the overall top games list. We also had a great lineup of system solutions, including our Resort Wallet and IGTPay Cashless solutions. On this slide, we have provided just a selection of the top-tier awards IGT has won over the last 5 years. Just a month ago, we won the Product Innovation of the Year at the Global Gaming Awards for our Resort Wallet with IGTPay Cashless solution. The other thing I wanted to point out is the sizable gaming patent portfolio we have, including the largest portfolio of cashless and payments patents in the industry. You've heard us say a few times this morning that we have the best-in-class, fully integrated cashless solution in the industry. Let me explain why that is the case. While there are a number of companies offering cashless solutions, all of those companies are either e-wallet providers only. In other words, while they provide payment services, they do not have a land-based casino management system or they're a casino management system provider who does not have any external funding or payment capabilities. We are the only ones who have both. Our land-based casino management system, which we call Advantage, has built into it a full payments module. We are the only ones that have a complete, fully integrated end-to-end solution whereas the others need to have connections to other systems or other providers. So we can simply offer one wallet, one account and a one-step process, the others cannot. For us, it is absolutely critical that we get the user experience right as that is what will lead to adoption and success. We are confident that the solution we have deployed is best-in-class, and we will work relentlessly to further refine it, thanks to players and customers' feedback. Now I want to touch on the OPtiMa program, which we announced last year. The program was based around 3 areas: improving our overall operational excellence, product simplification and various margin improvement initiatives. In the operational excellence category, we have significantly redesigned our supply chain processes and manufacturing footprint. This has resulted in us being able to significantly lower our overall cost of product. As an example, we have managed to lower the cost of certain critical components by over 20%. On the product front, our strategy has been to ensure we are developing content that is interoperable. In other words, content that can run on a variety of cabinets rather than being cabinet specific. As Renato previously mentioned, we've also been focused on ensuring we have our creative and technology hubs in the locations that make the most sense and where large talent pools are available. Finally, we have done a lot of work on refining our hardware life cycles and improving the way we manage the introduction of new cabinets. We've also been able to rationalize our real estate portfolio, given the new normal with more people working under a hybrid model, partly from home and partly from the office. In Las Vegas, Melbourne and Beijing, we have reduced our cost of overall real estate by more than 50%. All of these programs have allowed us to significantly improve our overall margins. The graph on the left-hand side of the chart indexes our gross margin to 2019 levels, so you can see the progress we've already made in 2021 and more to come. Now I'd like to hand it back to Renato to wrap up.

Thanks, Nick. I would like to now touch on our 2021 to 2025 global gaming outlook. Our objectives are quite simple. Hopefully, we have been able to clearly articulate the key growth initiatives that we are committed to and that we believe will lead to double-digit CAGR revenue growth over the next 4 years. You can see from the graph on the right-hand side that we expect to be able to take our current revenue levels of $1.1 billion to somewhere between $1.7 billion and $1.8 billion by 2025. Furthermore, through continued cost management discipline, like we have been able to show over the last year, and ensuring that R&D investment is appropriately allocated to high-return projects, we expect our global gaming OI margins to improve to somewhere between 28% and 30% in 2025, which is more than double what we reported in [ 2019 ]. As noted, 40% of this improvement is driven by cost efficiencies. Now let me wrap up by reinforcing the same messages that I started out with. IGT operates in a large and attractive industry that is on a solid path to recovery. We have a nicely diversified suite of products and solutions and currently enjoy leading market position in many of the product verticals we operate in. I am proud of the leadership team we have assembled to run this business and the broad industry experience they have. We have a clear strategy that will result in us being able to significantly grow our market share and revenues. We have also been focused on executing a number of important cost initiatives that will result in significant margin improvement. All of this leads us to believe that we should be able to deliver meaningful revenue and margin growth over the next 4 years. Thank you very much for taking the time with us today. Now we would like to take your questions.

Your first question comes from the line of Carlo Santarelli of Deutsche Bank.

As you -- and I don't know who necessarily would want to take this question. But as you guys kind of think about the almost 600-basis points of kind of operating margin improvement. If you could maybe perhaps try and bucket that between the slide that you show where kind of digital as a percentage of total GGR targets up to, call it, 20%. Obviously, the margin benefits of that, that would accrue to you versus the metrics that you've already put in place, including the OPtiMa 2.0 program and whatnot. How much is kind of predicated of that 600 basis point bridge on kind of things that are within your control and assumptions that you would make about the broader market?

Carlo, and hello to everyone. I guess the first question comes directly to Max.

So Carlo, you're forcing me to walk a little bit ahead of my presentation. I have very -- around our prepared remarks later on that will provide you a full download on the question. Let me just address high level that about a little bit more than 50% of the uplift in margin will come from the growing -- innovate initiatives, so primarily growing the business and execution on our plan. A little less than 50%, we'll continue to accrue from our optimization initiatives. And so we feel very good that we have a balanced mix and the ability to really get to our target.

Operator, next question.

Your next question comes from the line of Chad Beynon of Macquarie.

Appreciate everything thus far. First question maybe for Fabio and Jay related to iLottery. This sector appears to be more competitive than the land-based lottery business. You mentioned omnichannel solutions as something that kind of separate yourself from your peers. But can you maybe just kind of talk about how your market share assumptions may differ if the lottery decides to expand where you have an FM relationship versus going through maybe a proper legislative RFP? And then related to that, can you just kind of talk about in the areas or in the states where you haven't won? Maybe kind of where you came up short and what's going to change going forward?

Thank you, Chad. I will reply on the first part and then when it is about the customer perspective, I will leave to Jay. Yes, we have a view on the omnichannel solution. And the omnichannel is leveraging our FM relationship because we do believe that the most advanced lotteries they have in mind player-centric solutions, and we are perfectly positioned in working with our FM customers in deploying such a solution. This is a solution that will allow to combine seamless experience for the players across the entire spectrum of the touch points. We have solutions. We have a full set of mobile application. And most importantly, all these mobile applications already perfectly integrated with our Aurora Retail platform. So we do believe that we are well positioned, and we have also investment in conversations with our customers. When is about the customer perspective, I will leave to Jay.

Yes. So each state has different procurement rules. So some issue in RFP, but we have facilities management contracts. There are oftentimes where we negotiate extensions, including lottery possibilities with our customers. So it really is a state-by-state discussion.

Great. And then also related on the lottery side, if it's okay to ask one more. I just want to ask about how you're thinking about growth in instant printing? And if anything has changed, how the states, I guess, issue primary and secondary awards? I feel like this is something, given your content and given your relationships, it certainly puts you in a good position, but just wanted to ask about how that could look. And then also just in terms of the cycle of these coming up, are these opportunities within the next 4 years that could be baked into your growth?

As you noted in my remarks, instant ticket service is a growth engine in our plan. And I keep on extensively discussing about all these opportunities and the strategy is driving our growth with Jay. So still Jay, can you give us some direction?

Yes. Thank you. Certainly, we are the newest player in the instant ticket printing market have been doing for about 15 years. We've made some investments down in our facility in Lakeland. We now have a very state-of-the-art infrastructure. And that's resulted in us winning several primary contracts over the last several years as well as we've been increasing our market share in multi-vendor accounts. And as I look out over the next 5 years, I think it's very reasonable for additional states to migrate away from the primary secondary relationship and more towards the multi-vendor. This encourages competition amongst the printers to maximize the growth of the lottery. So I feel very good about where we are now. We've made a lot of progress, and we look forward to many other multi-vendor states coming on.

Most importantly by leveraging all our innovation -- innovative products lineup, such as the Infinity that we mentioned in our remarks.

Your next question comes from the line of Barry Jonas of Truist.

Marco, you've touched on this before, but perhaps Fabio and Renato, can you maybe add some more color on how they see synergies between their respective businesses.

Yes. I think we framed quite clearly in my remarks, we have synergies across the content. We have synergies when it comes to the products and the technology. We have had additional synergies. But maybe I can ask Renato to start.

Thank you, Marco. Yes. So well, we can start from content, think of Wheel of Fortune, right? Just to make an example, an iconic brand for IGT is, of course, very significant for the land-based business, but it's very, very powerful in the digital space. Not to mention, I believe Jay and Fabio are very happy to have that brand into the eastern ticket area. Or think of what we brag about being the most successful, most important part of our portfolio, so the cashless solution or the payment solution. This is a technology that was originally developed into the digital space that was early adopted by lottery. And now we have gained that experience, integrated that piece of technology, call it this way, into our casino systems. And because of that, we believe we have the smartest, faster than [ nimbler ] solution in the market. There are many, many other opportunities. Think of hardware engineering. We have a group of very smart engineers in Reno, and they design the best solution for any cabinet that we provide, be it a slot machine or be it a lottery terminal or the vending machines in lottery. I could continue for hours. So I think I should stop now.

No, no, we do not allow. I'm sorry.

All right. Thank you.

Your next question comes from Ben Chaiken of Crédit Suisse.

In [indiscernible] I think you mentioned the larger TAM as in an expanded player base, if I heard you correctly, and then also larger spending per customer, I believe you mentioned. Who is that new -- if you can kind of give us any color, who's that new customer you picked up? And then how do you get comfortable on the new baseline, if we can call it that?

Yes. I think -- yes, for sure, you have to answer this. Thank you, Ben. Another very nice question, most importantly, for our line assumption. As I mentioned in my remarks, we've been observing player behavior for several months. We conducted researches in Italy and in U.S. And of course, we talk a lot with our customers because this is also their challenge. The player base expansion is coming from a combination of iLottery and retail and is attractive in general, more young players. When it comes to the average consumption, let me say that players are enjoying the experience because if I had to quote players awards, lottery is a little moment of joy, is accessible, is easy, is fun, is entertaining and most importantly, the elevated per capita consumption is still very modest. So we do believe that combining the excitement of the player and expansion in the player base and the sustainability of the incremental per capita spending, this is positioned to incorporate as a new baseline for the future.

Your next question comes from the line of Zach Silverberg of Berenberg.

Just one on lottery. Can you sort of discuss the opportunities surrounding the renewal -- the favorable renewals that you sort of outlined during the lottery portion?

Yes, this is something that is in our horizon. It is more moderate compared to the past 5 years, more importantly and as long as Jay is dealing with our customers on a daily basis. Again, I will ask Jay to give you some direction on our renewal cycle.

Yes. Fabio, hit it right on. As I look out on the horizon, we have 2 large customers, New York and the United Kingdom. But outside of that, over the next 3 to 5 years, there are very few RFPs that we expect on the horizon.

Of course, excluding lotto in Italy.

And of course, then we have [ lotto of this ] position to the very end of the 5 years horizon.

Next question, please.

Your next question comes from the line of David Katz of Jefferies.

I wanted to ask about the installed base. And this, I suppose, is for a question for Nick. I thought you may have indicated that more of the growth in the installed base or the premium installed base was going to be international rather than domestic. But I think you also had a slide showing that the installed base actually was up in the third quarter for the first time in a while. I just was really looking for a clarification as to what we should expect in the installed base and particularly the premium installed base, both domestically and international and based on what you said?

Sure. Thank you very much for the question. Look, we are expecting some volatility in terms of our global reported installed base numbers, mainly because of the structural changes that are expected in the WLA markets of Rhode Island, Delaware and New York. That is something that we mentioned in the Q3 result and as we mentioned in our presentation a little earlier. So between kind of now and the first half of next year, you can expect to see some of that volatility. I can tell you in terms of the premium installed base, there is a lot of opportunity for growth there for us in North America. As we mentioned, the multilevel progressives that we are focused on right now, that is really going to help us fuel that growth. But there is also opportunities in the international region as well, mainly in Latin America. So hopefully, that clarifies things for you.

Perfect. And if I could follow that up, just with respect to that aspect of the business and the land-based portion of the business, looking at the competitive landscape, it would seem that other large competitors are increasing their focus on land-based gaming and compiling personnel. Some of the smaller upstarts seem to be demonstrating some momentum. How do you view the competitive landscape for your land-based gaming and particularly that installed base that occurs in the next 1, 2, 3, 4, 5 years, what are you positioning for?

Yes. As we mentioned earlier this morning, we are very focused on the multilevel progressive segment. In fact, if you came to G2E, you would have noticed that we had something like 18 different MLPs on display, a record -- it was a record for us. This is a segment that is really important for us to grow our installed base, but also to help us in the core video in the core video segment. Back to your earlier comment about R&D. I can tell you we're investing a lot in R&D and bringing in new talent into the organization. In Australia, we have recently brought in new creative talent to the studios. We have also signed up -- strategically signed up relationships and agreements with a number of proven third parties in that area as well. So it's a key focus area for us.

We just leave that in North America, right? This is quite -- very recent. So we signed up a couple of important players, we believe, small players, but very focused on MLPs, which is exactly why we want to improve our positioning. And so that should bode well for us.

Your next question comes from the line of Barry Jonas of Truist.

I just had a follow-up question from before on iLottery. I'm curious to get your sense on what is the growth in iLottery should be incremental versus players to shifting spend from retail channels? And how do you think about the percentage mix between iLottery versus retail sales evolving longer term in the U.S.?

Thank you, Brian (sic) [ Barry ]. This is another very interesting question. And let me start by saying that there is -- in our observation and conversations, there is now a general consensus, not only from ourselves, the iLottery is incremental. The reason why for being incremental is grounded in several factors. First, it is attracting a younger player base compared to the retail offering. Second thing, the consumption is growing because of very specific and more entertaining content. Third, we've been extensively observing jurisdictions where both retail and iLottery was regulated several years ago, almost recently, and we always notice that both channels growing simultaneously. There is also a sense that the digital evolution and the iLottery evolution is proving good also for retailers. On the view on the market, if we combine our assessment, our studies, public outlook, we do believe that in general, 1/3 of the growth will come from iLottery and 2/3 will come from retail.

We do have some questions from the web chat that are also focused on iLottery. One in particular is about the remuneration model in iLottery, is it as a percentage of wagers or net gaming revenue? And there's also a question related to the capital intensity, does the growth in iLottery reduce the capital intensity of the lottery business in general?

Let me start by the capital intensity. The capital intensity, I mean, deploying iLottery is requiring some investment, of course. The investments are more limited, and they happen over time. So it's more than contributing to the lowering of the capital intensity, a lot they are contributing to the incremental growth of the business. On the remuneration, let me just say a simple thing. The remuneration on iLottery in general is pretty much similar to an FM contract. So it's a revenue share on either sales or GGR. So the important thing to note is it is perfectly aligned with the growth opportunity of the category.

Thank you. We appreciate the questions we've received thus far. We're going to take a 5-minute break right now. When we return, we'll have presentations from our digital and betting leaders and our Chief Financial Officer, and will be another opportunity for folks to ask questions after that. See you in 5 minutes. [Break]

Hello. My name is Enrico Drago, and I'm leading PlayDigital since I founded in early 2018. PlayDigital includes IGT's iGaming and sports betting activities. I joined IGT late in 2014 and spent the first 3 years running Italian operations with Fabio Cairoli and his team. And prior to that, I spent 7 years at Inditex. During the next several minutes, you will hear a story about leadership and growth within the 2 most exciting markets, sports betting and iGaming in North America. Thanks to the performance of our content, the solidity of our solution and the strong and long-lasting relationship we built with our customer. We're well positioned to continue expanding our footprint in a fast-growing markets, while maintaining a leading position across both iGaming and sports betting. In the iGaming segment, operators want more and more games, games that attract and retain players, games that perform. Our games, brands and innovation capabilities, our own key ingredients to success. Talking about sports, every licensed casino racetrack tavern bar wants to offer sportsbook, but they don't know how to do it. Our omnichannel full turnkey and scalable solution has proven to be among the best, and it will continue to be. So all in all, we expect our revenues to grow 20% on an compounded annual basis and operating margin to expand several hundred basis points and to reach a solid 30% incident on revenues. Talking about North American market, which will be the biggest arena for growth during the next few years, we expect it to reach $26 billion by 2025. We expect iGaming to reach [ 13 billion ] by 2025. This is a combination of existing market growing at a conservative high single digits and based on average per capita spending of $160 plus 6 additional jurisdictions that we expect to regulate iGaming between now and 2025. So we estimate that by then 1/3 of total U.S. adult population will have access to iGaming. Talking about sports, we expect maintaining the current $55 per capita spending with the addition of several new states in order to reach approximately 90% of adult U.S. population. We achieved strong increase in the year-to-date period fueled by growing acceptance of digital and betting products and solutions, including new market expansion. $123 million in revenues in 2021 year-to-date, which represent a growth of more than 50% versus prior, while EBITDA and operating income margin grew up to 32% and [ 23% ], respectively, in our revenues. In 2020, we processed 1/3 of total non-American sports and iGaming wagering, a testimony to the scalability and reliability of our infrastructure in a rapidly expanding market. Currently, almost 80% of total revenues are from iGaming and North Americas, the region accounts for more than 85% of total revenues. In 2020, when it comes to iGaming market share, we reached a solid 25% in the U.S., while in Canada, it was a solid north of 50% of the regulated markets. The current market leadership and how we built it, which represent our current competitive advantage, will also be the very solid foundation on top of which we will continue to expand the business moving forward. How? First, our products. Both our iGaming content library and the omnichannel turnkey sports solution and alongside the velocity and flexibility to be deployed into new markets. We're always first going live on day 1. Second, our customer. The strong and long-lasting relationship with our customers in terms of both footprint and ability to work with them on truly omnichannel proposition. Third, our talent, especially game and software developers and including very senior hiring such as Joe Asher, on sports and Gil Rotem on iGaming. As we look forward, both innovation and accelerated growth will continue to be our key focus. When it comes to growth, it's growth on content portfolio, both proprietary and also via partners program. Growth in number of sports turnkey customers, we're leveraging a strong commercial pipeline. Growth on resources to invest all across the board now that digital and betting is a dedicated segment. Innovation on products in line with what we've done so far, which has proved to be successful. Innovation on game features, think about free spin, tournaments, personalized jackpot to further enhance the player experience. Innovation further enhanced retail and omnichannel features and hardware as the vast majority of operators are taking this direction. Innovation on leveraging data to further fine-tune our offer. Talking about optimization. And as our CEO, Marco Sala noted, we're working on a legal entity and organizational realignments of digital and betting over the next 12 months to support the valuation of a separate public listing of the business. We believe this might amend our strategic flexibility and incremental value creation. Our team has a tremendous experience and track record as well as a focus on their respective function. Recent appointment of Gil Rotem as President of iGaming will increase our capabilities on creating a greater variety of top-performing games and developing cutting-edge technology. Joe Asher brings incredible knowledge, experience and network to further expand our sports betting capability. And the rest of the leadership team are deep experts in their fields and will support the business to grow and expand as planned. When it comes to iGaming market, we expect 2021 to close well above $5 billion in GGR, as both U.S. and Canada are delivering, over delivering actually, this is more recent estimation, and drivers are both higher daily active user and per capita spending, which is, on average, $160. As we move forward, we expect existing market to grow at a high single-digit rate and at least 6 additional jurisdiction to either launch iGaming or evolve from the current monopolistic set up to a fully competitive one. So our estimation in new jurisdiction openings, the results of both our relentless government relations monitoring and lobbying activity at a state level and alongside big operator efforts towards the same goal. So all in all, and assuming that B2B vendors are collecting approx 10% of B2C GGR generated, we expect the addressable market to reach $1.3 billion by 2025. Our existing customer network footprint is 1 of the 2 most valuable assets we have, and we will continue to expand it over time by both extending it to new jurisdiction as well as opening it to new partners that will enter regulated markets. Two aspects I want to further highlight. First, having our RGS directly integrated into operators plan allow us to both go live on day 1 when a new market opened and to fully leverage our unique game library, as there's no -- barely no aggregator or middle man between our technology and operators one, we're turning into revenues, 100% of NGR generated by our games plus with full control on our stock. The other most valuable assets is our game library. 120 active titles, including slots, progressive table games and video poker, which contains 40-plus years of key development experience alongside our unique expertise to turn them into high-performing mobile game as we did during the last 10 years. Unique IPs such as Wheel of Fortune, Clopatra, Da Vinci Diamonds and several others. And alongside flexible RTPs and localization capabilities, expand the appeal of our games to a wide range of operators. As we look ahead and talking about how we will sustain the current leader position, when it comes to contents flowing through our network, we're poised to build a unique casino content ecosystem that aggregate the best performing content into a state-of-the-art platform, which will continue to evolve. Content-wise, we will focus on 4 verticals: omnichannel, digital native games, progressive jackpots and partner program. Talking about omnichannel, PlayDigital game developers will continue to cherrypick the best land-based games and to refine there and transforming them into successful digital version as we rebuild games for the reaches digital experience. As our back catalog continues to perform strongly and as we see more and more operators continue to leverage their retail player base, we will continue to invest on it, creating sequels, brand extension, jackpot version as well as inclusion of third-party mechanics are some example of ongoing developments. New extended and even branded version of existing table games will allow us to stay relevant also in this category. Digital native games, as we recognize that more and more players are also acquired by operators from different channels than land based, we will continue to expand our library for this vertical by continuing to create from scratch both new mechanics and new themes, combining both existing and new mechanics with both classics and new themes. Targeting the right combination of these ingredients is and will be more and more data-driven as we access an enormous set of data around player behaviors. More generally speaking, we will continue to improve and refine the creative process around this. Progressive games. IGT has a long history and associated number of patents of successful progressive games across both channels. And we will continue to invest on it in 2 ways. First, by adding more games to our existing programs, Mega Jackpot a digital-only high price, low frequency network and Powerbox, the only multichannel program whereby players are contributing to it playing the same title across both mobile and land-based. Secondly, by creating new programs such as low price, high frequency, which is about to be launched, and we'll have several very well-known titles as part of it. So far, each and every omnichannel, digital native and jackpot games has been developed by our own internal game studio. But there are amazing talents out there that can contribute their creativity and knowledge to the process, and we're seeking access through our own distribution network and technology. So in order to fully leverage this ecosystem, we created a partner program called IGT Foundry. External game studios have access to both our library and development tools to create any sort of game. They will also add new mechanics and themes to the existing one. So the result is that operators and via the same integration and game lobby will have access to more quantity, variety and complementarity. The good news is that this program has started early this year, and we're already working with 6 studios to deliver 15, 20 games during 2022 and on. I will now pass the baton to Joe Asher to talk about PlaySports.

Thank you, Enrico. I'd like to start with a quick look at the addressable market for sports betting in the coming years. There's been a lot of discussion of the total market at the B2C level, but not as much at the B2B level. As you can see here, we think the B2B market will grow from about $1.5 billion to close to $5 billion by 2025. Of course, that's dependent on when specific states, including California legalize sports betting, but this clearly is a segment that will grow nicely. Additionally, while the vast majority of the sports betting market will be online, we think about 30% or so of the B2B opportunity will be in retail. Retail will continue to be important even for digital operators as retail provides brand awareness and experience Think of the new sportsbook in the Capital One Arena in Washington, D.C. or with FanDuel is building in Phoenix and Connecticut. Also, it's very beneficial from a customer service and payments perspective. So while the world is no doubt moving online, there is a lot of opportunity in retail as well. Retail benefits from structurally higher margins for a number of reasons. The margins are higher because most of the betting is prematch rather than in play, and there are a higher percentage of parlays in retail as opposed to online, especially parlay cards. Moreover, retail customers tend to be less price sensitive. If you're standing in the sportsbook at Resorts World in Las Vegas, and you want a bet on tonight's game, you're not likely to drive to another casino to get that extra 0.5 point. But it's very easy to do exactly that by switching to a different app on your phone. Beyond the margin difference, many operators prefer to spend their limited resources, focusing on their online business and more readily outsource aspects of the retail business, in part because of the hardware needed in a retail sportsbook, things like kiosks and the betting terminals. Sportsbook operators are not manufacturers. IGT is. You know that sports betting is expanding rapidly across the United States. As you can see here, our market penetration is as well. 19 states already live. Louisiana almost live and the Oneida tribe in Wisconsin coming soon. We expect that expansion to continue in the coming years with major states like California and Texas still to come. IGT has a high-quality customer base that we expect to continue to grow. Of course, FanDuel is the market leader, and we benefit from their continued growth and our strong working relationship with them. But we've got other really good customers as well, including the Rhode Island Lottery, which we operate in partnership with my friends at William Hill. That's how Enrico and I first got to know each other. And we've got other great customers such as Boyd Gaming and Resorts World and many more. We're also really excited that we soon will be going live with the Arizona coyotes. Alex Meruelo owns the Coyotes as well as 2 casinos in Nevada. And he will be the first sports team operator to operate his own sportsbook rather than partner with an existing operator. And we could not be more proud of the fact that Alex chose to partner with IGT. The Coyotes will utilize IGT's proprietary sports betting platform, which provides pretty much everything an operator needs from a tech perspective. The betting engine, the wallet, the event management and the like across all the distribution channels, whether they be online, a kiosk or a betting terminal. Our mobile offering is also fully integrated with per mutual wagering for horses, and our unified app is currently live in a field trial with our partner, Boyd Gaming in Nevada. The system has proven its ability to scale with customers like FanDuel and supports relatively easy third-party integrations, which is so critical in the market today. Moreover, our turnkey customers, such as the Coyotes use our trading services, which includes a team of traders or bookmakers in Las Vegas that we will continue to expand. We will continue to invest in technology going forward as there are a number of features that we want to develop and enhance. We have a team of about 135 software developers today, which we are in the process of expanding as there are limitless number of features and innovations to come in this area. One thing I am particularly excited about is our new bartop machines that you may have seen exhibited at G2E. I've been talking about betting sports on a bartop machine for years. going back even to before I sold Brandywine to William Hill in 2012. There's such a big opportunity for integrated bartop that has both the Game King type content and sports betting built into it. It's especially valuable in places where there is a limit to the number of machines a bar owner can have, whether due to regulation or space constraints. I remember G2E in 2019, Renato and Enrico showed me the new CrystalFlex terminal. It's the same integrated concept as the bartop, but in a sit-down model designed for the casino floor. I said, that's great, but I'd really love to see it in a bartop machine. I've been talking about that for years. Well, I finally got my bartop machine. It was really popular at G2E, and I can't wait to see it live next year. So in conclusion, there are significant tailwinds that will help this business continue to grow in the years ahead. There are a number of opportunities to grow with our existing customers, both in the current jurisdictions and as they expand into new jurisdictions as well as a robust pipeline of new customers and new opportunities. I've only been at IGT for a short time but I hope you can tell how excited I am about the opportunities that lie ahead for this business. And with that, I will hand it back to Enrico.

Thank you, Joe. Talking about financials, we expect the top line to grow at more than 20% compounded growth rate. In order to sustain this growth and maintain a leading position, we will focus our investment on both game and software development and related tools. CapEx investment is mainly dedicated to footprint expansion will remain relatively low, given the nature of the business, which is very scalable. In terms of operating margins, we expect it to grow above 30% of incidents on revenues. So to recap about Play Digital, we are well positioned to continue expanding our footprint in a fast-growing market while maintaining a leading position. In iGaming, our r games, brands and innovation capabilities are all key ingredient to success. Talking about sports, our omnichannel full turnkey and scalable solution has proven to be among the best one, and it will continue to be it. So offering attractive go profile while further increasing margin generation is what we're going to do. Thank you. And with that, I will leave the stage to our CFO, Max Chiara.

Thank you, Enrico, and hello to everyone. I hope you have enjoyed a compelling story my colleagues have presented so far. I'm Max Chiara, CFO of IGT Plc. I joined IGT a little less than 2 years ago at the height of the pandemic. Some might consider joining a company where half its business was shut down and with an uncertain financial outlook to be a bold move, but it required me to jump right in, fully committed to addressing the headwinds we faced. Prior to joining IGT, I was CFO at CNH Industrial, where I led the finance team that helped the company achieve among many other things, an investment-grade rating through financial rigor and laser-focused work. This was not an easy task, but the benefits were clear and motivated the team to accomplish our goals. Since beginning here at IGT, I have consistently applied the same attitude, and I'm pleased with the results we have achieved so far. As you have seen today, this is an exciting time to be a part of IGT as a customer, an investor, a stakeholder or an employee, and I'm very excited by the opportunities that sit ahead of us today. What you are going to hear from me is a vision of what we think IGT can achieve by 2025. I believe we are at the beginning of a significant transformation. There are 4 key messages that I would like you to leave with today. The first is the resilience of the portfolio and the culture of operational excellence in IGT. This has been on display prior to the onset of COVID, but we have seen it in full force during the last 18 months as demonstrated by our swift recovery to above pre-pandemic levels while positioning ourselves as a stronger and more agile company. Second, we aim to responsibly fund future growth while remaining focused on cost discipline. Third, we expect to generate robust cash flow, allowing for continued delevering and strengthening of our credit profile. Fourth, we're grounded in a balanced capital allocation approach focused on the highest return opportunities, which drives accelerated profit growth and substantial shareholder returns. In a nutshell, with this plan, we are committed to delivering mid-single-digit revenue growth, over 500 basis points in operating margin expansion and up to $4 billion in cash from operations and up to $2.4 billion in cumulative free cash flow from 2022 to 2025. Let me now start with an overview of some key financial metrics and highlight the uniquely resilient nature of IGT. Our P&L metrics are already above the 2019 levels as strength in global lottery was able to absorb pandemic-related headwinds experienced in global gaming. We also benefited from incremental contributions from the high-growth Digital & Betting segment. The experience of our management team led to the implementation of swift cost actions at the onset of the pandemic, achieving $500 million in temporary cost savings and/or avoidance. We also implemented the OPtiMa program, which led to over $200 million in permanent structural cost savings, allowing us to emerge from the pandemic with a stronger margin profile. The strong profitable growth profile of the business and continued financial rigor gives us confidence in our ability to generate robust cash flows. This year, we expect both cash from operations and free cash flow to be near or above 2019 levels. The strong cash flow generation combined with the sale of the Italian B2C business, led to an over $1 billion reduction in net debt compared to the end of 2020, driving leverage below 4x for the first time in company history. Now I would like to discuss the strategic pillars of our multiyear targets and long-term value creation. We expect accelerated revenue growth driven by the innovative content and technology solutions, my colleagues have presented today. We remain grounded and responsible and disciplined R&D and CapEx investments to fund the innovation that drives growth while continuing to optimize through structural cost savings and a more efficient capital structure, creating the conditions for profitable growth and strong shareholder returns. Now looking to the future, we expect accelerating growth to provide a path to stronger margins. We plan to build on our leadership position in lottery and land-based gaming while enjoying incremental contribution from the high-growth Digital & Betting segment. These initiatives are expected to drive mid-single-digit organic revenue growth, reaching a range of $4.6 billion to $5 billion in 2025. Top line growth, coupled with gross margin expansion and operating expense leverage should drive operating income up at mid-teens compounded annual growth rate with over 500 basis points of operating income margin expansion over the '21 to '25 time period at the midpoint. Importantly, we foresee contribution to revenue and margin improvement from each of our business segment. I would like to provide some additional color on the margin expansion trajectory. First of all, it is important to remind everyone that the first half of 2021 included certain lottery discrete benefits such as the closure of the gaming halls in Italy and the benefit of LMA and elevated multi-stage airports in the United States. Together, this lottery discrete benefits lifted operating income margin around 300 basis points in the current year. After adjusting for these items, we expect around half of the margin improvement in the plan to be driven by growth in our core businesses. The majority will be from the continued market recovery in Global Gaming, which we expect to return to 2019 levels by 2023. Lottery after a record year in '21 is forecasted to enjoy mid-single-digit same-store sales growth through 2025. Additional margin enhancements will come from high-growth initiatives. We believe Digital & Betting will continue to experience double-digit growth over the next few years. After hearing the exciting digital embedding opportunities in Enrico and Joe's presentations today, it's easy to understand why we think these growth rates are achievable. Global Lottery also presents area of high growth as we increase our share in iLottery and instant ticket services. The remaining portion of the benefit will come from further optimization initiatives, targeting the supply chain and the product margin enhancement actions that will primarily accrue to Global Gaming. Finally, when looking at our 2025 target, we decided to provide an operating margin range to account for the compelling yet achievable targets in our individual business initiatives. As I previously mentioned, all segments are contributing to revenue and profit growth over the planned horizon. Starting with Global Lottery, after adjusting for the lottery discrete benefits in 2021, we spoke before, we see an enhanced revenue growth profile compared to the pre-pandemic period, driven by same-store sales and capitalizing on the instant ticket services and iLottery opportunities. All in all, Global Lottery revenue is expected to grow mid-single digits and increase over the historical low to mid-single-digit range. In addition, strict cost discipline, coupled with the top line growth will help drive margin expansion. Global Gaming, which was impacted the hardest by COVID, is forecasted to experience double-digit revenue growth, fueled by the continued market recovery and the strategic growth initiatives presented earlier today by Renato and Nick. As you are aware, the Global Gaming segment has been and will be benefiting the most from the OPtiMa program, which we believe will lead to substantial margin improvement. Digital & Betting will continue its strong growth trajectory with revenue increasing at a compounded annual rate of over 20% through 2025. We expect double-digit revenue growth across both iGaming and sports betting. An important aspect of Digital & Betting is the software and content as a service business model that provides compelling margin leverage as the business case. As reported last week, we already achieved over $200 million in structural cost savings so far this year compared to 2019 under our OPtiMa program through a combination of operational excellence, complexity reduction and other margin improvement initiatives, we have become a leaner, more efficient enterprise. I'm excited to announce today the launch of OPtiMa 2.0, a second phase of the program, targeting an additional $150 million in savings by the end of 2023. We have identified 2 near term opportunities, which represent about 2/3 of the incremental savings. The first capitalized on continuous supply chain optimization and operational excellence efforts. We have also identified additional opportunities to realign our real estate and facilities footprint. The second near term opportunity is interest cost savings realized through the optimization of our capital structure, which is already evident in the anticipated 100 basis point reduction in our average cost of debt compared to 2019. The final 1/3 will come from tax rate enhancements which will take a little longer to realize. We are working on realigning our legal entity and tax structure. With these enhancements, we are targeting a low 30% effective tax rate, which is a significant improvement from our historic levels of low to mid-40s. In terms of the geographical benefit of those savings to the income statement, about 1/3 of this will benefit operating income and the remaining 2/3 will reduce expenses below the operating income line versus the 2019 run rate. The enhancement of our OPtiMa program will further strengthen our profit and cash flow going forward. As much as we are focused on cost, we continue to invest in the business to produce innovative content and thrive growth. Over the next 4 years, we intend to invest almost $3 billion with nearly 60% going to capital expenditures, mainly for lottery technology and infrastructure and the gaming machine installed base. The remaining 40% is dedicated to research and development to support innovation, content development, our intellectual property and investments in the high-growth digital business. We allocate capital following designated criteria and project-specific financial KPIs that are monitored over its life cycle. Now I'd like to take a moment to discuss where we are in the investment cycle. We currently are experiencing lower level of required capital expenditures for the renewal and extensions of lottery contracts. Over the next few years, we expect increased levels of required investments from the low point in 2021. Despite the higher levels of investments, we feel the plan we are presenting today is very compelling. In more detail, when evaluating lottery capital investments, we use project-specific targets. The specific focus on responsibly funding growth has driven double-digit returns well above our weighted average cost of capital. We will also deploy capital in emerging opportunities such as instant ticket services and iLottery, which strengthen the already compelling growth profile of the business. When it comes to gaming, considering the successful execution of OPtiMa and the 20% capital rationalization achieved versus the pre-pandemic averages, we plan on allocating investments by product lines to drive efficiency and profitable growth. As an example, the largest opportunity for margin improvement is in the full recovery from the pandemic of our global product sales and the international market. Another area of strategic focus is on MLPs, which was on display at G2E last month. We expect MLPs to help drive improved returns on premium leased games. The improved market penetration we have reported over the last few years in global core game sales is a direct result of our test bank approach. We have recently expanded the test bank process to leased games, allowing us to further focus our R&D spend on the most successful games. The investments in the business are expected to generate robust profits and cash flows, which are the engine for value creation. Our outlook includes up to $4 billion in cash from operations and up to $2.4 billion in free cash flow from 2022 through 2025. And over the same period, cash conversion will improve to around 65% when calculated before any upfront license fees associated with the Italy Lotto renewal. This compares to 53% in 2019 and represents an annual average cash from operations of about $1.2 billion over the next 4 years, pre-Italy Lotto renewal. It is important to keep in mind that CapEx and investment in general can be lumpy as it is largely dependent on lottery contract cycles, the most important being the Italy lottery licenses due in 2025 and 2028. With this plan, we have earmarked between $1.5 billion and $1.8 billion for us to continue to strengthen our balance sheet and enhance shareholder returns. Over the planned horizon, we expect to maintain a leverage ratio of 2.5 to 3.5x through the capital investment cycle. During our Q3 earnings call last week, we reinstated a quarterly cash dividend of $0.20 per share. And this morning, we have announced a multiyear $300 million share repurchase program that nicely rounds out our capital allocation plan and returns to our shareholders. The net result is a balanced approach to capital allocation, with the majority, up to 60% of operating cash flow allocated to funding capital expenditures in our existing core business and growth opportunities and making required payments to minority interest. Up to 1/4 would be returned to shareholders through the reinstatement of our quarterly cash dividend and through the launch of the $300 million multiyear share repurchase program and 20% also will go towards further reducing debt. As Marco and Enrico noted, we are in the process of creating a separate legal entity for Digital & Betting to support the evaluation of strategic alternatives in light of this fast-growing business. Doing so will accelerate investment decision and enhance accountability. Our strong cash flows and robust financial condition provide a span of flexibility for us to consider selective M&A in high-growth areas such as Digital & Betting. In the last year, we have made significant improvements to our capital structure as we have paid down debt, extended maturities and reduced interest costs. Each of our most recent debt transactions in euros and dollars were at the lowest coupon rates in company history. Recently, we successfully amended and extended our term loan facility adding the unique feature of an ESG margin adjustment. This margin adjustment is another example of our commitment to ESG. As we expect to approach 3.5x in the next 12 to 18 months, we are also introducing a target leverage range of 2.5 to 3.5x for the plan, where we intend to remain throughout the investment cycle. Doing so provides us with a strong credit profile and a flexible balance sheet with ample liquidity. And here is where we bring our multiyear targets together. As you can see, we provide a clear path to compelling value creation. First, we are introducing our 2022 outlook where we expect revenue to be between $4.1 billion to $4.3 billion with a 20% to 22% operating margin range, representing a year-over-year improvement after adjusting 2021 for the lottery discrete benefits we experienced in the first part of the year. Our strong cash flow generation is expected to continue with $850 million to $1 billion in cash from operations. CapEx is expected to increase to between $400 million and $450 million due to the timing of certain lottery projects. In addition, we are introducing our long-term outlook. We have set aggressive yet achievable 2025 financial targets with revenue growing at the mid-single-digit compounded annual rate reaching between $4.6 billion and $5 billion. Over the same time period, we expect the flow through from our top line growth paired with the structural cost savings we are implementing to drive mid-teen operating income growth with an expected 2025 margin range of between 26% and 29%. That represents a 500 basis point increase versus 21% at the midpoint. And at the same time, from a balance sheet perspective, we are targeting to be at the lower end of the leverage range guidance by 2025. We have a high level of confidence in our ability to achieve the financial plan we have laid out today. The impact of many scenarios are well understood, giving credibility that the plan is reasonably protected. We forecast that a 10% impact to the upper range of the 2025 revenue target would result in 300 basis points of margin compression. In fact, if such headwinds were to occur, we expect to be able to potentially mitigate them through a reprioritization of CapEx and R&D spend while reducing SG&A costs. In addition, our performance throughout the pandemic proved the resilience of our business model even during a recession. The resilience of our business gives us confidence that we will be able to maintain our leverage goals and to continue to pay dividend and repurchase shares even in a no-growth scenario. Now I'd like to wrap up reiterating the key messages I started with. Number one, the resilience of our business is the reason to believe in the mid-single-digit revenue growth outlook we have provided today. Number two, our commitment to responsibly funding profitable growth and cost discipline drives our over 500 basis point of expected margin expansion. Number three, we are committed to generating robust cash flows up to $4 billion in cash from operations and up to $2.4 billion in free cash flow, allowing a strengthening of our credit profile. And finally, the cash generation powers our balanced capital allocation plan, focusing on the highest return initiatives to drive accelerated profit growth and delivering strong shareholder returns. Before concluding, I want to thank the IGT Investor Relations team that worked relentlessly in the last few months to prepare this important event. I also want to thank you for attending today's presentation and for your continued interest in IGT. We are excited to execute on the plan we have presented today and to deliver over the coming quarters and years. Now I'd like to open it up for any questions you may have for the IGT team. Thank you very much.

We're going to begin the second Q&A session now. Feel free to ask questions to the entire team of presenters today. [Operator Instructions] As a reminder, the web chat is located to the right of the main presentation screen. Operator, can you patch through the first question, please?

Your first question comes from the line of Ben Chaiken of Credit Suisse.

In your longer term projection, there's a few moving parts. So at risk of oversimplifying, just kind of I want to quickly walk through the EBITDA bridge to make sure I was thinking about it correctly? You have base EBITDA of $1.5 billion pro forma for the sale. It sounds like there's $200 million of EBITDA uplift from savings, the old $150 million plus the new hitting the P&L. And then I think you suggested in the lottery section that there's -- you're expecting roughly $400 million of EBITDA growth between 2025 and 2019. To kind of wrap that all together ballpark that puts you in an adjusted EBITDA range of $2.2 billion-ish in -- by 2025. Is there anything I'm missing there? Or did I oversimplify too much? Is that reasonable?

No. In principal band, you got the high points of the work. What I would like you is to refer back to my prepared remarks on the work slides of the presentation, where you can see the margin uplift on the operating income comes effectively from the 3 buckets of initiatives. And we have simplified the view bucketing all the initiatives by category. So the first one is the grow initiatives, which is the gaming recovery to 2019, consider normalized levels by '23 as well as the lottery expanded growth profile that Fabio presented in -- during the day. And that makes up about 6% of margin lift. Then you got another couple of points coming from the high-growth initiatives, namely the Digital & Betting growth as well as the incremental growth opportunities in lottery from iLottery and instant ticket servicing. And last but not least, you've got about 3 points of margin uplift that comes from the optimization initiative. So it's effectively the continuation of our OPtiMa program that we very successfully executed during this year, primarily affecting Renato's and Nick's business in Global Gaming. We think that with this group of initiatives, we have a strong case to hit our targets, our long-term targets for 2025.

Your next question comes from the line of Barry Jonas of Truist. Again, your next question comes from the line of Barry Jonas of Truist.

As we start thinking about the next round of Italian concession renewals starting 2025, how high would you be comfortable taking leverage ratios to -- beyond 2025 through the cycle?

Look, at the end of the day, this plan is geared to bring us to a leverage ratio, which we consider within our OPtiMa capital structure. We have done extensive work with our financial advisers over the last few months and extensive meetings with Marco and the Board to really assess where we should be best positioned for the next round of the heavy lifting, which is coming to fruition in 2025 through 2028 with the important renewals on the 2 Italian contracts. And we think that with this plan, we're going to be in a very good position to competing for those contracts when we get to 2025 at the lower part of our range of leverage closer to the 2.5x.

So is 2.5 to 3.5x sort of the new range to think as opposed to before, it was 4x was sort of the benchmark or below 4x?

Absolutely 2, 5 to 3x, if you want to be more specific, it's really where we should see it optimally, and we build half a turn on top of it just for flexibility to be able to absorb negative hit during the cycle. But effectively, we are targeting the lower part of the range for 2025. And the margin over that target is going to be on a constant basis down the road, as you have seen happening during 2021 as well in terms of lowering that leverage range as time goes by towards that target.

Great. Great. And then just a quick one on the share repurchase program. Any parameters on how you plan to execute on that program?

Look, first of all, this is a primer for IGT. So I think we are very proud of the decision that we have been able to agree upon with the Board and moving forward. Secondly, we have an internal perspective as well as an external perspective vis-a-vis the buyback. So from an external perspective, this is a very compelling program for IGT and rounds out nicely our yield in terms of shareholder returns on top of what we recently announced as a reinstatement of our quarterly dividend. So we're going to end up obviously, considering the current market prices in between 3% and 4% when you annualize the program and you annualize on top of the dividend. From an internal perspective -- and by the way, the buyback program at $300 million represents about 10% of the float, which is a sort of a normal practice when you look at companies launching these initiatives new. The internal perspective is that we also have to take into account limitations around our credit agreement, and we have an annual limit of $300 million, we can appropriate for restricted payments, namely dividend and buyback. So when you do the math, you're going to pretty quickly get to the limit, if you assume that program to be executed over the next 3, 3 years plus.

The next question comes from the line of Chad Beynon from Macquarie.

Regarding the Italian contracts, 2 part around this. Firstly, can you help us think about the rough minority payments that we should assume going forward in your, I guess, in your free cash flow projections given the strength of this contract? And then secondly, given the recent sale of one of your minority partners on the Scratch & Win side of the contract, should we assume that anything changes there just in terms of how we should think about your ownership or the government's view of the consortium?

Let's start from the minorities. So effectively, even though historically, we have been around $200 million to $250 million per year of minority payments, the payment is made up by 2 parts, is return of capital, which you can clearly see whatever is left over from our balance sheet as of the end of September, about $700 million, plus a stream of dividends, which make up about $150 million plus per year, that obviously depending on how much money we bring home with that business. Having said that, the minority is an important component of how we have constructed the -- and engineered the funding of those contracts initially but this is just for now an assumption in terms of placeholder that we have assumed for our plan. I think, Marco, you may want to expand on terms of what those opportunities lies ahead of us?

No, I think those are great opportunities that we are truly focused on the renewal of our contracts in Italy. Now it's too early to talk about a partnership. Let me say that we are doing very well with our current partner. I'm pretty sure that we will have all the time to discuss how we want to approach those bids going forward. But for the time being, I'm very confident with the progress we are doing in the business vis-a-vis the Italian regulator to position ourself very well at the time of the renewals.

And then separately on the Digital & Betting segment, can you please talk about live dealer and how this kind of fits into the industry growth. We've heard a lot of companies in the space talk about this. If you think this is critical to participate in the compounded annual growth rate that everyone is projecting through 2025 and 2030?

Yes, definitely. Thanks for the question. If you look at more mature markets, especially in Europe, typically live dealer reach something like 25% or 30% of the total iGaming market. So the core remain a more traditional slots and other table games, which is for the time being our core focus. Definitely, this is an interesting and fast-growing business. But there's a big difference between how it is operated in Europe, where basically from one studio you can broadcast to several jurisdiction compared to the U.S. where in each and every state because of the legal framework, it needs to be sited in a specific in each and every state. So this might make the overall live dealer business not so scalable as we experienced so far.

Your next question comes from the line of Carlo Santarelli of Deutsche Bank.

Just one for me. Obviously, you kind of laid out the growth road map across each of the 3 business segments. And speaking more to kind of the top line growth and where you expect to be out to 2025. What would you say are kind of the biggest opportunities or perhaps said differently, the places where you've been most conservative as it pertains to your assumptions around the revenue build?

Carlo, I think that we have been very focused on the growth in the lottery part of the business. I think that the fact of having this new baseline for growth, it's very important. And I think that the contribution of iLottery where by definition, we will put all the possible efforts in order to get the great games and to invest all the possible talents we might need to pursue that opportunity will give us confidence in our ability to grow over the years. I think the recovery of gaming is the expectation. It's more difficult predict if we have been more conservative or more aggressive there because it depends very much of the pace of the international recovery. While in the U.S., as we have already seen, the things are doing well right now. They are known where the highest opportunity can come is the digital part of the business. We are talking about a CAGR of 20% over the years, but that is very much related to the opening of the market and our ability that has been very clearly defined by the presentation of Enrico and Joe to maintain a solid market share there. In that respect, if the regulation will go faster, we could have even a higher growth there. So that is the way we look at our business.

Your next question comes from Ricardo Chinchilla of Deutsche Bank.

Can you please provide us some color with regards to your conversations with the rating agencies? And any potential path that you guys have envisioned towards becoming investment grade? And any comment on your willingness to go towards each path?

So good question and who doesn't want to be investment grade, right? You've got a huge benefit on lowering your cost of debt, higher accessibility to the financial markets in any cycle condition. The real point is that you also need to understand how relevant it is for your industry; in the industry where you compete, how relevant it is to be investment grade and how much do you need to spend in terms of efforts, resources and commitment to get there, but more importantly, to stay there. So in a nutshell, what we are -- we have -- the way we have been looking at this matter is if we get to our targets by 2025, we're definitely going to be in an investment-grade space position from a pure rating metrics perspective. The real point is that I can't commit to get there. What I want to commit to is to a strong crossover rate which is definitely between 1 and 2 notches depending on the rating agency of uplift versus today, which I think is in our full control, in our hands. Once we get there and we get to the targets in '25, we will evaluate if it is worthwhile to get an investment grade and more importantly, to stay in investment grade at any cost.

Perfect. If we know where your bonds are trading versus some of the coupons we see a significant difference that would provide you for some attractive refinancing. Could you please comment on your willingness to refinance some of the '25 and '27 paper? And going forward or longer term your mix, your preference between the mix of fixed rate versus variable rate debt?

Look, I don't want to get into the weeds of the answer right now, and we can take this off-line with either Claudio Demolli, our Treasure, or Jim. What I want to tell you is that we have done a tremendous work in the last 1.5 years. We have reduced our short-term commitments. We have effectively cleared our way for the next 2 years. There are no maturities in front of us for the next 2 years, which makes that this team very comfortable in believing that they have the resources to invest in the opportunities that lie ahead of us. Having said that, we continue to look opportunistically at ways to retire high expensive debt and replace it with more convenient economic debt that is also more flexible. We are in the midst of a transition from our capital structure, and we are trying to look of ways to expand the amount of the debt that we have with a flexible repayment schedule such that we can act very quickly, in case Marco and the Board decide to take any strategic directions that requires the company to adjust its capital structure in a very short period of time. So my commitment for Marco and the Board is to create more and more flexible capital structure as quickly as I can.

Your next question comes from the line of David Katz of Jefferies.

I wanted to talk about the capital allocation decisions and some of the information out there. Just thinking about the balance between dividends and repurchases and what -- other than just overall fundamental improvement, what might alter the decisions to say, hypothetically add more to the share repurchases or accelerate that and add further authorizations. I would just love a little more color on the dividends versus repurchases decisions and flexibilities there, please?

Look, at the end of the day, right, this is a balanced capital allocation. If you go through the remarks, Marco's remarks and my remarks, what we wanted to transfer as a key message is that we want to be balanced between our different commitments. So when you run through your model, you're probably going to find out that we have more or less a balanced allocation of capital after capital investments and payment to minorities between cash return to shareholders and cash available for reducing debt. Having said that, if we will be in a position to generate cash flow in excess of our planned commitment, then everything is back on the deck to be discussed. And eventually, that could go towards inorganic activity or even towards increased shareholder remunerations. The goal for us was to provide a clear and simple message that would be easy to understand and would also be easy to model out in the financial modeling so that you can really grasp the benefit of this plan vis-a-vis the value creation potential that it maintains.

Your next question comes from the line of Zach Silverberg of Berenberg.

Just one for me. You mentioned selective M&A in high-growth areas. Can you highlight any potential opportunities and the strategy regarding inorganic growth given the updated balance sheet outlook?

Yes, for sure. I think that it regards mainly the digital and betting space. We are very committed to grow that space, and we are open to deploy capital for selected acquisitions. The focus is mainly on the contents, when we're talking about iGaming specifically, we are very interested in reinforcing our portfolio. We did very well with our content, the land-based content, but we have to keep on enlarging our portfolio. So the main focus for acquisitions in the digital and betting space will be related contents.

Your next question comes from the line of Ben Chaiken of Credit Suisse.

This has all been really helpful, and I think points top side in the business. With that said, there continues to be a large multiple delta between you and peers. I guess, specifically on Lotto. What are the tools you have at your disposal if the multiple doesn't expand? Is it, I guess, a, is that a priority for you, but then more to the core of it, what are the tools you have? Would you ever expand the repurchase? Would you ever consider anything strategic on the Lotto side? I would love to just kind of address this.

Now that is a very key question. We spent our entire day talking about our portfolio, but even more importantly, providing you the solid foundation for us to grow and to create value for IGT going forward. Each of these business are profitable, has a very good growth prospects and are expected to generate solid cash flows. That will result in value creation for all the shareholders. Having said that, we are, of course, focused in the value creation of our shareholders. So what we will do, we will monitor the extent to which the market will recognize the intrinsic value of each segment, and we will keep on monitoring it. And of course, this will be a constant discussion among the senior leadership team here, but it will be also an ongoing discussion with the Board where we might elaborate strategic alternatives if is the right moment or it is important to do that. But it is very clear to us what you are referring to, and there will be a specific focus on it going forward.

Your next question comes from the line of Domenico Ghilotti of Equita.

Just a clarification. So if I understand well, your cash flow from operations, the target is embedding also some, say, upfront payment for the lottery from Slide 18. So this has been included in year 2025, while it is not included in the cumulative CapEx in some kind of working capital just to be sure on that. And you are mentioning on the M&A opportunity. Are you -- so how are you including this potential opportunity in the plan? Or is it included?

So you're right, Domenico. The -- we have not elaborated any particular assumption around the next round of renewals of the Lotto contract, we have just taken whatever was executed last time and applied a placeholder of a similar size, if you want. Last time, 2/3 of the investment was done in year 1 and the final 1/3 was done in year 2. So what you effectively have in our plan, you have about $700 million-plus in 2025, which is the first year of the 2, that is eating up, obviously, cash from operations because -- from an accounting perspective, this upfront fee is considered as a cumulative discount provided to the customer ahead of the execution of the contract that gets then amortized over the period of time, as you know very well from our financials. So in a nutshell, that's why I made that comment of $1.2 billion on average because I wanted to compare apple with apple, '21 -- 2021 with the average of the next 4 years without having that hangover of the upfront fee tranche baked into 2025. So you see the compelling cash flow generation that is in our plan from the above $900 million of this year to the $1.2 billion average of the next 4 years excluding the upfront fee. And in terms of the M&A, again, acquisitions in the digital and betting may be accommodated with the current plan. And you noticed I left a little bit of flexibility on the capital allocation plan between debt retirement beyond the shareholder returns because we want, obviously, to maintain a little bit of flexibility.

And just another question on your geographical footprint, hearing your explanation on the plan. Basically, you are still extremely focused on North American opportunities, both lottery and digital and some of the rebounding in Latin America. I'm still seeing that Asia is not -- apart from Australia, it's not say the strategic focus for the next 4 years?

I can tell you now, Asia is in a very difficult position because it's still hit from the pandemic. We have programs in Asia, mainly for gaming machines. We have been working on it for some time. We are ready to expand our position there. Unfortunately, it's not a short-term exercise given the issue related to the pandemic. Another geography where we are devoting especially on gaming machines, some focus are the Eastern European countries where we think we can play a good role increasing our share and having profitable growth. The rest has been mentioned by Nick talking about South America that represents for us an opportunity to grow our business. And so the focus by definition is North America because there are a lot of things that are going on that are very attractive for us. Italy remains one of our most important geographies to grow the business. And then there are several opportunities across the globe that we intend to pursue during the planned horizon.

Your next question comes from the line of Barry Jonas of Truist.

Can you walk through the consideration points around listing or not listing the digital business? And is any of that thought process applicable to lottery?

No, I can take this question, talking in general regarding digital. Digital is a great opportunity. Well appreciated from Enrico and Joe's presentation, the kind of opportunity we have ahead of us. And we want to be perfectly equipped to take advantage from that opportunity. That's the reason why we are creating a separate operating and legal entity. The reason for that is we want to have a more flexible organization. We need to have enable process of making -- sorry, decision-making process. We have to have a great team of talents, and we have also to have a good incentive plan to motivate them, and we want to deploy all the capital is needed to grow that part of the business. When it comes to the evaluation of a separate listing, it's something that will come later on, but it is also providing the acquisition currency to efficiently make and pursue M&A opportunities when they come. Having said that, it's clear that this part of the business is very strategic for us. And when we talk about a possible listing of that part of the business, we intend to maintain the full control of the operation because the iGaming, in particular, is very much linked with the land-based game. Regarding the point on lottery goes back to a more broad question that I answered in the previous question regarding how we will look the market reaction to the very -- to each of our segments in terms of valuation.

Got it. And then just a point of clarification. I think in prior Analyst Days for prior outlook, there's been this concept of growth CapEx that you've discussed. Is that -- does the current outlook to 2025 still factor this growth CapEx concept? Or is that just embedded in the CapEx guidance you gave?

It's embedded in the number.

We're going to move to some questions from the web chat. We've received many on iLottery in particular. Specifically, if we can comment on how we view our competitive positioning in iLottery moving forward? And where we think penetration rates for iLottery can go both in the U.S. and in Italy?

Thank you. Let me start by our competitive positioning in iLottery. And again, let me start by saying that we have a sound and solid platform to start with 3 platforms deployed in North America, 8 globally, 7 customers, 7 jurisdictions where we sell instant. But to be candid and straight, we are not fully satisfied. Therefore, we had thoroughly assessed the areas for improvement. We started to invest on these specific areas to improve our platforms, our technology, expanding our library of content, and initial results that we are enjoying are confirming that we are taking the right steps with the platform. The first new platform deployed seamlessly and with great customer satisfaction in Georgia. With our first-to-market cloud solutions for the RGS instant being deployed in Georgia and Kentucky. And also with our recent new titles in the instant space, being very successful, both in North America and in Italy. So we are taking the right steps. Most importantly, we have invested -- we are investing, and we will invest whatever it takes. As I said before, our leadership in the FM space, in North America, most importantly, is providing us several opportunities ahead of us because we intend to play across the entire set of opportunities and to respond to all the possible customer-specific requirements.

Great. We've also received a number of questions on iGaming. And specifically, our conviction in the growth outlook since it is a very strong growth outlook for iGaming revenue. And if there's any seasonality, folks should be prepared for in that business.

I guess, Enrico.

Yes. Thank you. Definitely, this is not a particularly exposed to seasonality business. besides something obvious like in deep winter people to tend to stay home so they play more, especially towards holidays and the same applies to the summer, especially when it's a good weather, people tend to stay out. But there's no major variation in the month over month. So you can definitely expect quite a regular monthly contribution from this business.

Okay. We have a question on earnings per share. And based on Max, some of the commentary you made on below-the-line efficiencies, how should folks be thinking about the trajectory for earnings per share?

Well, this is a very good question and kind of encompasses if you want the plan to the bottom line. Effectively, we're going to reap the benefits of our OPtiMa programs, margin expansion, interest expense reduction as well as tax reduction. And the EPS is expected to grow at a 25% CAGR during the plan. So effectively, it's a very compelling target. And right now, we don't particularly provide emphasis on our quarterly calls, but we may effectively change our mind. We foresee effectively that the EPS is solid and it's -- it obviously is important to expand on our reporting as well on those.

Marco, I think this is a question best put to you, which is given all that folks have heard today across the different segments, what -- how would you characterize the 3 biggest priorities that the company needs to be focused on?

At the end of this long presentation, I think I should come clear. I think the profitable growth of all our businesses are our first priority. It goes across the segments with the characteristics that we had been discussing during the day. The second is the cash flow generation. We are working -- taking care of growing the business, but associating that with the optimization programs that we have been discussing so far, that will provide additional boost for our cash flow generation. And finally, we spent time about capital allocation strategy. I reiterate the point, we want to have -- to use our cash to sustain our current business and doing also some specific acquisitions, if needed. We have to deliver the company, and we have a very strong commitment on it that I think is truly very achievable. And then we want to return capital to our shareholders. We have discussed about dividends. We have introduced for the first time, also share buyback. And those, I think, are the 3 main priorities for our plan and from all this management team.

Okay. We have just reached the time. There are more questions which the IR team is happy to reach out and respond directly to you. But at this point, I think we'll turn things over to you, Marco, for some closing remarks.

My closing remarks are very simple. We want to thank you all for having spent some time to stay with us. I hope you had the opportunity to better understand the new IGT, let me call it this way, once we have presented each vertical, their plans, our financial goals, our priorities and we all hope the value creation that these all things may bring to all our stakeholders. And having said that, next time, I truly hope to see you in person. There are many conferences. I hope to participate to some of them. And for today, I thank you again, and I wish you a great day.