Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the International Game Technology First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. James Hurley, Senior Vice President of Investor Relations, you may begin your conference. Hello, and thank you for joining us on IGT's Q1 2023 conference call hosted by Vince Sadusky, our Chief Executive Officer, and Max Chiara, our Chief Financial Officer. After some prepared remarks, Vince and Max will be available for your questions. During today's call, we will be making some forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our latest earnings release and in our SEC filings. During this call, we will discuss certain non-GAAP financial measures. You'll find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our press release, the slides accompanying this webcast, and our filings with the SEC, each of which is posted to our investor relations website. Now I'll turn the call over to Vince Sadusky. Thanks, Jim. Hello to everyone joining us today. As you've seen in our announcement this morning, we're reporting a great start to 2023. Q1 revenue exceeded expectations on good momentum across all operating segments. Net of FX and the sale of Italy commercial services, revenue was up 10% from the prior year. In Global Lottery, same-store sales were up 8%, marking another quarter of accelerated growth. The Global Gaming and PlayDigital segments each achieved high teens revenue growth in the period, fueled by strong key performance indicators. Q1's 24% operating income margin came in at the high end of our outlook, primarily due to better-than-expected Global Gaming performance. It's worth noting all three segments had strong profit margins in the quarter. We generated $449 million in EBITDA, which is among the highest level in company history. That was achieved even without any contribution from Italy commercial services in the first quarter of this year. We also generated significant cash flow, and our financial condition has never been stronger, with leverage improving to three times the lowest level ever. I'd like to spend some time on the operating performance of each segment, beginning with Global Lottery. Q1's 8% same-store sales increase was the fastest growth in the last six quarters. Italy same-store sales were up over 10% as new game innovation and portfolio optimization strategies drove sales higher for both draw games and instant tickets. 10eLotto, our largest draw game in Italy, is benefiting from players returning to their pre-pandemic behaviors. Gong, the fourth add-on game for 10eLotto launched late last year, is also driving growth. We recently enhanced Italy's Scratch and Win portfolio with the introduction of a EUR 25 and EUR 0.50 tickets. Both are performing well and appear to be generating incremental sales volume. The Scratch and Win player base has increased by over 1 million players from pre-pandemic levels, which has supported sustained category growth. Turning to North America and the rest of the world, same-store sales increased 7%, reflecting solid growth for core instant tickets and draw-based games that was driven in part by elevated Mega Millions sales related to the $1.3 billion jackpot in the period. Our expanding portfolio of any instant games elevated U.S. multi-jurisdictional jackpot activity and the contribution from new international markets led iLottery sales up over 80% in the first quarter. This performance helped maintain the accelerated growth profile we experienced in the second half of last year. The Global Gaming segment is executing on all fronts, evidenced by the 17% revenue increase and 34% operating income growth achieved in Q1. Our global product positioning has never been stronger and key performance indicators continue to reach new heights. We shipped nearly 8,300 gaming machines, the highest ever for a Q1 period. The sustained success of MLP titles such as Wolf Run Eclipse and Egyptian Link is being complemented by a pipeline of exciting new MLP games like Magic Treasures, Raise the Sails, and Cats Wild Serengeti. The combination of compelling games and hardware has enabled us to maintain the leading U.S. and Canada ship share for the last few years, complemented by record ASPs for the region in Q1. The installed base was up year-over-year and sequentially for both the U.S. and Canada and rest of world. It is high-quality growth as evidenced by the 7% year-over-year increase in global yields. The success of new WAP games and MLP games is an important factor sustaining our momentum. In a recent Eilers Research report, IGT had 15 of the top 25 WAP games highlighting the strength of the Wheel of Fortune and Megabucks franchises. Since 2020, we've greatly expanded the number of MLP games offered on our leased machines. The MLP installed base has grown by over 30%. Prosperity Link is a recent success story, and we launched two new game titles in April to support its momentum. We have an exciting lineup of new MLPs, including Mystery of the Lamp, which will be launched later this quarter on our new PeakCurve49 cabinet. We expect to build the rest-of-world install base in the balance of the year as we focus on increasing our lease game presence in Latin America. We've made good progress with our cashless solutions, entering into a multi-year agreement to enable cashless gaming with our Resort Wallet and IGTPay Solutions at the Graton Resort & Casino, one of California's largest slot floors. Turning now to PlayDigital, where our focus on key initiatives has resulted in double-digit top-line growth. iCasino, which represents about 80% of the segment's revenues, had a strong quarter, thanks to an improved cadence of new game launches in the U.S. and Canada, where player demand was heavily concentrated in progressive jackpot games during the period. We also have the benefit of contributions from our iSoftBet acquisition coming in this year. In March, we launched Wheel of Fortune Online Casino in New Jersey through our long-standing relationship with BetMGM and Sony Pictures Television. It's a unique omnichannel offer leveraging one of the most successful and iconic slot brands. We are exploring opportunities to expand the concept into additional jurisdictions. Our expanded iCasino IP portfolio and accelerated pace of new game development provides new ways to add value for our customers. This includes developing custom games and game assortments to drive a more engaging player experience and create a win-win-win proposition for IGT, our customers, and the player. Sports betting was up in the first quarter on an expanding footprint in new and existing markets. Recently signed a three-year contract extension in Rhode Island. We're pleased with the growing adoption of our turnkey solution. To conclude, the compelling innovation we've been bringing to market, coupled with strong customer and player demand, is providing momentum across our Global Lottery, Gaming, and PlayDigital segments. The better-than-expected first quarter performance puts us on track to achieve our full-year goals. We have a strong balance sheet and access to significant liquidity to support investments in our strategic objectives. We believe this provides an opportunity to create significant value for our shareholders as we progress towards our 2025 targets. I'll turn the call over to Max. Thank you, Vince. Good morning, everyone, and thank you all for joining us today. The strengths of our various businesses were on full display in the first quarter financial results reported this morning. We generated revenue of more than $1 billion, slightly ahead of our outlook, driven by 8% same-store sales growth in Global Lottery and high-teens revenue growth in Global Gaming and PlayDigital. More specifically, while reported revenue was stable year-on-year, if we adjust our performance for the sale of the Italy commercial services business executed last September and for foreign currency translation, revenue was actually up 10% year-on-year. Operating income of $255 million was also relatively stable while adjusted EBITDA grew 4%. Again, net of the Italy business sale and FX, OI grew 6% and adjusted EBITDA was up 8%, more in line with organic revenue growth. I want to mention right away that we absorbed higher SG&A and R&D expenses of about $29 million year-over-year. About half of the increase is primarily related to the conscious decision to further invest in talent to support the growth of our business, in addition to returning to more normal trade show participation. The other half was primarily driven by the timing of certain items, such as costs associated with consolidating iSoftBet, as well as some VAT expense and legal accruals. Operating income margin of 24% was at the top end of the outlook range on strong Global Gaming performance. The effective tax rate in the quarter was impacted by a valuation allowance on non-deductible interest in the U.S. and non-cash foreign currency losses. When we adjust for these items, the effective tax rate was in the mid-30s% range, which is in line with our expectations for the quarter and the full year. We delivered a fully diluted earnings per share of $0.11 and an adjusted EPS of almost $0.50 per share, with the year-over-year difference all attributable to a higher tax rate. Let's turn to our business segments, starting with Global Lottery. First quarter revenue of $624 million was down 8% as reported, but up 4% if we adjust for effects and for the sale of the Italy commercial services. Global same-store sales increased 8% as strong player demand drove growth across geographies and game types, accentuated by robust sales related to the $1.3 billion Mega Millions jackpot that hit in January. Product sales were lower year-over-year due to large terminal and system deliveries in Poland in the first quarter of 2022. $240 million in operating income and a strong OI margin of 38% reflect the high profit flow-through of same-store sales growth, including the elevated jackpot activity I just mentioned and the positive contribution from higher sales in Italy. As a reminder, in our current outlook, lottery sales in the first half of the year are expected to be stronger than in the back half, given the very strong jackpot activity we had in the second half of 2022, which we aren't planning to recur at this time. Compelling product offerings in Global Gaming continue to drive strong results. Revenue of $381 million increased 17% during the first quarter, with sustained double-digit growth in both service and product sales category. Global unit shipments rose 15% year-over-year to almost 8,300 units, the highest ever for a Q1 period, primarily driven by a 23% increase in the U.S. and Canada. Global ASPs were up 12% to a record $15,900, thanks to a more favorable mix of content and new hardware, as well as the early impact of recent pricing actions. The global install base and yields increased both year-over-year and sequentially, with growth in the U.S. and Canada and rest of world. The US and Canada install base increased 804 units sequentially due to an almost 1,500 unit contribution from the Rhode Island JV, partially offset by almost 200 unit Rhode Island in Rhode Island that were temporarily removed in Q1 due to casino floor renovations, which are expected to come back in Q2. Removal of older unsupported units, unit converted to sales, and planned WLA market removals in New York and Delaware make the difference. Global yields rose 7% on the continuation of strong performance across the portfolio, with yields in the international markets marching toward closing the gap versus 2019. Higher productivity from the install base and a leaner cost structure drove operating income up 34% to $69 million and operating income margin to 18%. On the back of this strong first quarter performance, we see a path to achieving an operating income margin of around 20% in the second half of the year, primarily reflecting the expected easing of supply chain costs that are starting to be visible in the material and components procured in the current period. PlayDigital revenue increased 17% or 20% at constant currency to $55 million. iCasino was up on strong organic growth and contributions from the expanded content and distribution network realized from the acquisition of iSoftBet in July 2022, partially offset by unusually high jackpot expense, which increased $10 million year-over-year. Jackpot expense is a contra revenue item that can have high variability based on the timing of when jackpots are won. Sports betting revenue was up on expansion into new jurisdictions through a customer diversification effort that is starting to show results, as well as preeminent organic growth from our stronghold markets. We're very pleased with the recent performance and reiterate our conviction in an improved market penetration, thanks to the recent announcement of newly acquired customers. operating income rose 9%, 15% at constant currency, to $14 million. operating margin of 26% was up modestly on a sequential basis despite significantly higher jackpot expense. When we normalize the severe impact of jackpot expense experienced in Q1, we see a further margin improvement of about two points that would move this business closer to the 2025 target of 30% plus OI margin sooner than originally expected. Cash flow generation was strong during the first quarter, with cash from operations of over $300 million and nearly $220 million in free cash flow. The resulting EBITDA to cash conversion rate of 69% included a benefit from the timing of certain Italy working capital items. It demonstrates we are making good progress toward the 2025 cash conversion target of 65%. Strong profit generation drove net debt leverage down to three times, the lowest level we have ever achieved. From a balance sheet perspective, we are nicely positioned with total liquidity of $2.1 billion, including unrestricted cash of $700 million and $1.4 billion in additional borrowing capacity from undrawn credit facilities. Recent progress in our cash flow performance and net leverage trajectory reinforces our conviction in achieving the lower end of our 2.5x-3.5x target net leverage ratio by 2025. This achievement is central and integral to our balanced approach to capital allocation. We are reaffirming the full year 2023 outlook with an even greater level of confidence in our ability to deliver against this financial target, given the strong first quarter performance. In summary, at this point in time, we prefer to keep a prudent approach for the full year in light of the current macroeconomic uncertainties. Specifically, the full year outlook range encompasses a somewhat cautious view on the second half of the year, including the potential for an economic slowdown in the U.S. We are introducing our guidance for the second quarter, where we expect to achieve revenue of around $1 billion and operating income margin of a range 22%-24%. We're off to a very good start in 2023, given the strong first quarter results that met or exceeded the high end of our expectations and set us on a solid path to achieving our 2023 financial goals. We continue to generate solid cash flows and have secure financial flexibility with the lowest net debt leverage level in company history and significant liquidity. I would now like to ask the operator to please open the line for questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Carlo Santarelli from Deutsche Bank. Your line is open. Hey, good morning, guys. Max, appreciating that the commentary that you just provided, as to the guidance. I was wondering in an environment where, you know, perhaps you didn't look at the second half and assume a macro slowdown, would you be thinking more about simply the high end of the guidance from a revenue and operating income margin perspective? Or, would you be comfortably, you know, above that high end of the guidance should economic conditions kind of remain stable through the back half of this year? Yeah, look, with this strong backdrop in Q1, we definitely are looking more positive towards the upper end of the guidance, absent a recession, a mild recession or a slowdown. It is also worth mentioning that the second half of the year right now in our guidance does not have any benefit from jackpot activities, which were very relevant last year. Just as a reminder, we achieved a net benefit of incremental $30 million a year ago in the second half. Again, it's a prudent approach both ways, and I think creates a solid ground for our future progress. Great. Thank you. If I may, just one follow-up. As it pertains to replacement demand in the U.S. and Canada, you guys obviously off to a strong start. I think your U.S. replacement's up about 7% or so. As you look at on the horizon based on the content, the hardware that you guys have coming out and obviously your conversations with your customers, do you feel like 2023 U.S. and Canadian replacement activity can be akin to at least 2022? Or do you sense that kind of back half comparisons there get fairly challenging as well, and that might level off? Yeah. You all have seen our customers, the operators, a bunch of them report very strong results, a lot of them record results. A lot of that growth that they've experienced, again, has been driven from gaming machines, slot machines in particular. You know, demand remains very high, as we mentioned, you know, setting another record for a particular quarter in shipments. You know, signs are good. Our visibility into the second quarter is good. You know, demand is where we expect at this point. I think, you know, IGT has benefited from having a strong game portfolio right now with a lot of hardware and software releases that our customers are excited to deploy and replace. If you recall the cycle of replacement in our casino customers' floors, although, you know, it's a good year last year, there's still a lot of old machines out there in need of replacing. We feel good about that. The percentage increases in the back half of the year for IGT for sure get more difficult, as you know, I think fourth quarter we set a record in that quarter for units shipped. I think you would expect and built into our plan, into our guidance is a reduction in the percentage increase. In terms of absolute numbers, you know, we feel very good about the continued demand. Great. Thank you very much, Vince. Thanks, Max. Your next question comes from a line of Benjamin Chaiken from Credit Suisse. Your line is open. Hey, good morning. Margins in gaming were particularly impressive, improving year-over-year and sequentially. Can you talk about some of the initiatives driving that growth? Is this organizational structure? Is the type of games you're selling? Just help us better understand the margin expansion. One quick follow-up. Thanks. Yeah. Benjamin, thank you for your question. I would say that starting from the top line, we see a better mix of fresher, higher content products that are driving higher price points naturally. We have the initial sign of some of the repricing actions that we announced mid of last year. I would say that about a third of our deliveries in Q1 were affected by positive pricing, so there is more to come in the next few quarters. Again, we continue to maintain a cautious outlook vis-à-vis the supply chain. The supply chain, which is expected to provide a significant tailwind in gaming in the second half, of about a third of the total impact of last year. If you remember, we mentioned $60 million of impact last year in gaming. Probably 20 come back this year and another 20 potentially next year. There is additional kind of carryover impact into the 2024 period from that. Again, it's a combination of top-line growth, improved productivity of our gaming machines, lower cost, and also some benefit from the reorganization that we have achieved, particularly in the, when we moved away from the regional organization into the global product lines, we were able to really reduce some of the overhang that we had in our cost structure. All in all, we feel good about our margin trajectory, and we think that we have a path to get to our 2025 target of 28%-30% in gaming. Yeah, I would just add quickly a quick sidebar to what Max mentioned. You know, what we've seen is the install base on our premium games that we lease, the yields are better to significantly better from the games that they replace. That has the kind of double impact of benefiting, you know, IGT financially. Of course, it makes these games very attractive and very desirable to our customers as well. That certainly helps. Got it. I appreciate the thoughtful answers. You actually got my second question as well. I'm all set. Thank you. Your next question comes from the line of Barry Jonas from Truist Securities. Your line is open. Hey, hey guys. Really appreciate the commentary on leverage, targets into 2025. I guess as we think a little farther out, is there a max level you would target as we think about the potential outflows in Italy with those two large contracts up for renewal at some point? Thank you for your question, Barry. Again, someone may argue that our leverage target is a little spread out. In theory, someone could look at that and say, "Which band would you prefer to be in?" If I sit here today and see how much progress we have made, I would naturally tended to say 2.5 to three times. Again, let's see where the rest of the year brings us, and I think we aspire to continue to improve our target towards that lower end. Okay. That band could potentially even hold factoring some of those renewals at some point. Yep. Wow. Okay. Just to follow up, you know, Q1 product sales were nicely ahead of our model. Any large orders you would call out there, you know, I guess how meaningful were some of those more unique markets like Canada, Oregon or maybe Georgia? No, look, we had this debate internally, and I think we have seen some structural changes in that demand in Canada that comes now to fruition more regularly. So, from time to time, we announce awards of orders from the different provinces as you have, if you go back to last year. We continue to look very positively into the Canadian market. We think that we have a pretty good grasp at the market penetration, and we think that market will continue to provide a tailwind to our trajectory as well. In terms of Q1, though, it sounds like there was some more recurring- Q1 had more deliveries associated with the orders we won early in the early part of last year. There are more deliveries that are intrinsically part of our global program. I would say that it's a low double-digit number in total of in terms of total deliveries that are going to the VLT market all in all. Obviously, it's primarily U.S. and Canada. Great. Thank you so much. Your next question comes from a line of David Bain from B. Riley. Your line is open. Great. Thanks so much. I guess my first question would be on the lottery. If maybe you can speak to the potential new structural lottery growth that seems to be taking place. It seems like we're, you know, in the early innings, although I'd like to hear your opinion of, you know, structurally higher growth profile for iLottery, you know, additional draws, numbers, higher price points, just things that are driving even Cash Pop, which you've innovated, that are driving new lottery growth. I'm wondering if the international is also following, you know, a similar concept path to what North America is doing? Yeah. As you know, the vast majority of our business on the lottery financials relates to North America and to Italy. You know, we had mentioned we saw really good growth in both markets, which I think was an acceleration from growth we've seen even last year. Of course, that growth is off of a higher base. Even though, you know, we'll see, I'm sure with no doubt, quarter -to -quarter volatility up and down around play levels. When you compare that to 2019 kind of pre-pandemic, the play levels across the world are higher to significantly higher. We do think that, you know, that is the most important long-term trend. Sure, you know, we've talked about it in the past. We think some of that has to do with economics, but also the incremental players that we've seen come into the lottery during the pandemic. I think the pandemic was unique, a unique opportunity to introduce players to lottery or kind of get them reacquainted with lottery. Fortunately, they seem to really like the activity. They like to play. I think for anyone who hasn't played the lottery for a long time or traditionally only played the lottery when there were big multi-state jackpots, I think they were pleasantly surprised by the game innovation that's taken place. There's a lot of ways to play, scratch and win. I think if you play for some time, both our daily draw games, our weekly draw games, multi-state jackpots, all the different alternatives that our team has, you know, worked with the, you know, lottery directors for years to develop. I think, you know, the pace of innovation has been pretty significant. I think there's kind of a game or two for everyone. So far, the play levels are sustaining quarter after quarter now at levels significantly greater than 2019. You know, our job is to keep working with our customers to continue to innovate. I think one of the most interesting, you know, reaffirmations of the attractiveness of lottery was the situation in Italy, where we saw last year, a decline, first half of the year in particular, in play levels. You know, I think that was we speculated that was driven by the unique scenario in Italy, where players were a bit slow to get back to their routines of spending time with their local tobacconists and especially with Lotto games. Ultimately, that's came back and this year in particular, we're seeing, you know, very strong play levels, in Italy. I think that was a really good kind of affirmation that playing is attractive and can continue this type of higher level. That's very helpful. I know you cited the $30 million jackpot benefit in the back half of last year. I mean, just given what you've just reviewed and again, some of the structural changes that have been made with additional numbers that have led to higher jackpots, is it more likely that we begin to see a recurrence of higher jackpots versus your baseline assumption? Is that something not to think about at this point? Look, the odds have not changed in terms of the game per se, but what has changed is the frequency of the number of draws that happens and the addition of additional add-on games, which makes the game per se more exciting to play. That's what drives probably additional demand. In terms of the future, we'll see what happens. Obviously, if the jackpot grows, that will potentially provide additional tailwind on our business. Okay, great. Thank you. Your next question comes from the line of Jeff Stantial from Stifel. Your line is open. Hey, good morning, Vince, Max. Thanks for taking our questions. Maybe starting off here on Global Lottery, same-store sales up nicely, really across the business. I was hoping you could provide some color on more recent monthly growth trends. You know, what are you seeing in March and in April in terms of same-store sales, in particular in the U.S. and in Italy? Yeah, sure thing. We really just have a look at April since the quarter's wrapped up. We continue to see good growth in Italy. We're seeing same-store sales above average growth on both draw and instant games. In North America, we're seeing same-store sales trend a bit below prior year, and we think that's a natural phenomena given some jackpot fatigue that, you know, we've had a really strong level of play in the first quarter with that high jackpot. We do expect that that will moderate, and those are the trends that we've generally seen over time. Great. That's helpful. Just sticking on the lottery business, really strong EBITDA margin. Some of that is going to be jackpot tailwind, other tailwind. Some of this is more structural. Just curious as what you see as the right baseline for segment margins moving forward, you know, putting aside some of that quarter-on-quarter volatility in multi-state jackpots or product sales or things of that nature. Thanks. Yes. This is Max. With the exit of commercial service from our portfolio last year, we have structurally improved our margin, call it 150 - 200 bips. The margin is always kind of affected by the mix of geographies, performance. As you know, the margin build-up is stronger where we operate as an with the full service versus where we have a lower presence. Effectively, depending on the geographic mix development, our margin may spikes up or down. Again, we feel comfortable saying that from an EBITDA perspective, we're probably gonna be in the low 50s. From an OI perspective, we're probably kind of targeting the mid to the upper end of the 2025 target range, which I remember was 33%-36%. Very helpful. Thank you both. Nice quarter. Thank you. Again, if you would like to ask a question, press star, then the one on your telephone keypad. Your next question comes from the line of David Katz from Jefferies. Your line is open. Hi. Morning, everyone. Thanks for taking my questions, and congrats on your quarter. I wanted to just go back to one of the earlier questions about cash generation, leverage, you know, the needs that you expect to have in the next few years. You know, where would you have to get to, in order to, you know, broaden some of the capital return alternatives? It's a question, you know, that comes up and is debated quite a bit. What would make you comfortable and how should we think about that? Hi, Dave. Thank you for the question. Again, in broader stroke, as you know, our philosophy is around a balanced capital allocation, and that leverage target is integral to that approach. Once we feel good about that target even in the face of incremental investment expected as our CapEx cycle is expected to start back again, primarily in the lottery business next year and even more so in 2025. We have to be cautious in terms of how we allocate our available cash flow generation from the business. Having said that, I would say that in terms of capital return to shareholders, we continue to execute on the dividend payout of about $0.20 per share per quarter. Also I think I would say we are well ahead of the game in terms of the share repurchase authorization that was launched at our Investor Day in November 2021 of $300 million. We have as-executed in the last 18 months a little bit more than 50%. We are ahead of the plan. Again, we feel comfortable about the position where we are right now. Again, we are willing to put to continue to generate dry powder in case of future developments and be able to allocate that cash to the different usage in line with our philosophy. Understood. Look, I think there's been, you know, I think it's fair to call it, you know, successful, you know, retooling of the MLP business. It was in an area that you talked about going back to last G2E. What would be kind of the next, you know, area of focus to continue the positive momentum in the gaming side? I think we're at a unique point in time. A lot of the hard work that's been done over many years, the R&D investment, the teams' ideation, I think is playing out right at this moment. When, you know, I spend time with the development folks and the product folks, we've got a lot of new hardware that's recently been introduced and some new hardware that's coming out this year as well. We're in a, I think, a really good cycle of game development. You know, we never really competed all that much in the Class II space. We have a pretty impressive Class II offering. I think our games that we've designed specifically for Latin America and Europe are doing well. I think as those economies continue to improve, we've got, you know, the best offering that we've ever had in those markets. In the U.S., we really didn't talk, for example, about our DiamondRS cabinet, the stepper space, where the company's traditionally been very, very strong and has ceded some share over the last couple of years. That cabinet and those games are very highly anticipated, and I think you'll start to see those roll out in large numbers. We haven't produced them in large numbers yet, as we continue to retool our manufacturing facility. I think if you look at our poker offerings, which is oftentimes taken for granted since we have such a large market share and just industry-leading games, you know, the modifications that have been made and the PeakBarTop hardware in particular, I think, that's, you know, there's very, very strong demand for that. And there's a bit of, you know, an enhanced pricing structure there as well, I think deservedly so, given, you know, all the money we've invested to make that industry-leading game, even better. In particular in the MLP space, you know, that's really been, as you know, a significant driver of our recent success, having game titles and machines that have really resonated. We're excited to really build off of that pipeline of successes in the MLP space. You know, as I had mentioned, games like, you know, Magic Treasures, Mystery of the Lamp, these games are out in test now, and they're performing very well. I think, you know, the studios are really excited. We had a global studios offsite about a month and a half ago with all of our game producers and studio leaders, and people are feeling very good. I think they feel like they've got models, math models and graphics models for success to continue to build off of, given the success in the MLP space and specifically the title Prosperity Link, which continues to be in very high demand. We feel good across all of our competitiveness in all of our categories. We've heard from our customers and from our commercial team. Our commercial team is usually our most difficult customer. They say this is, you know, this is the best suite of games that they've seen IGT produce in recent memory. Understood. Very helpful. Thank you. Your next question comes from the line of Domenico Ghilotti from Equita. Your line is open. Good morning. I have just one question related on labor costs. You, Marc, mentioned the fact that you are hiring new talents, and this is driving some operating costs higher. Can you give us a sense on how much is, let's say, the increase in labor cost that you expect this year and how much is the cost per capita? How much is inflation and how much is, let's say, related to unit? Yes. Domenico, hi. Effectively, we are looking to hire people In the areas where we can deploy them to further develop our games, our technology, expand our market presence. These are jobs that are attached kind of to revenue generation. The second point I would like to make is that we have seen a similar pressure on wages like many other industries have seen in the last few years with the sticky inflation. I think we are adequately adjusting our average wages in line with what we have seen out in the marketplace. Finally, I would say, the inflation continues to be a problem because it's sticky, but we have been able to eliminate that extra cost that we had to expense last year in regards to spot buys, ocean freight rate increases that have really generated the excessive cost pressure that we have seen coming to fruition through the P&L. Again, I think, we are in the midst of the de-escalation of this inflation process. We expect to start seeing some benefits out there in the second half of the year. Okay, thank you. A clarification on the comment that you made on the pricing impact was probably on the gaming business. You were saying one third coming from price actions. No. Yeah. One third of the machines delivered in Q1 had attached the benefit of a tag price improvement. There is still more to come in the next few quarters. Okay. In terms of, the machines that have been sold, so just part 1/3 have been benefiting from, the price increases? Correct. Okay. Well, my last comment, I was impressed by the performance of the Italian Lottery, frankly speaking. You have been mentioning many reasons why you have been able to deliver this kind of growth. I wonder if you can comment. You were commenting on April as strong as well, and so if you can comment on what can be, say, really, an underlying performance for this year, because I was really surprised by the strength of the business. Yeah, sure. The trend we have seen in the Italian Lottery since late last year are phenomenal, especially in the instant ticket part of the business. Again, both businesses are really growing phenomenally well this year. It's a combination of strong pipeline of new game that we have launched, starting with Gong in October, November last year in the draw-based game. Price point innovation and also favorable grow of the demand in the uptick in the price points. Last but not least, I would also say a little bit of benefit from easy comp as the same period last year, we were still affected by Omicron in Italy, particularly in the draw-based game. We have seen, players returning to more traditional, social, traditional way to spend their time and socialize more, which have benefited the draw based games as well. All in all, we're very confident that this trend, may continue for a while, and, we look forward for that, development. Do you think that these innovations can be moved or can be expanded to other geographies? Are you leading this innovation in Italy, and then you can move to other jurisdictions or is something that you already applied? Yeah. No, it's a great question. I think in our restructuring, that's been a significant focus of the lottery team and our division that works on game innovation and development, is to ensure that we have really good communication across the entire company so we could utilize innovation from one market to the other. When you think about it, you know, we believe IGT is in a bit of a unique position in that, you know, we actually run the lottery, right? We have the direct relationship with the consumer. We get all the data in places like Italy and New Jersey, for example. We're able to utilize that data immediately in the development of new games. For example, in Italy, we launched a 25 EUR ticket that we mentioned, scratch game. You know, there's obviously a lot to it. It's not just the denomination, but it's the math behind it, the payout, the frequency. You know, that game is doing, you know, very, very well. It seems to be sustaining. You know, we're utilizing and analyzing the data from that gameplay in thinking about the opportunity to roll out something similar in other markets. Yeah, it's a great question, and I think our global footprint and being in more jurisdictions than any other lottery gives us that database and that opportunity to learn from these experiences and drive product innovation across all of our markets around the world. Okay, thanks. Your final question comes from the line of Chad Beynon from Macquarie. Your line is open. Hi, this is Aaron on for Chad. Thanks for taking our questions. Sticking with lottery, with respect to lottery opportunities, in the past, you've talked about opportunities for increased lottery printing business. Have there been any recent contracts and any updates to your outlook there? Yeah, no, I would say that, you know, that remains an opportunity for us without getting into the details of the markets, where the printing contracts are terming out. You know, we've in general seen a trend over the last several years towards in North America in particular, lottery providing for incremental printers. Historically, when you won, you won all of the business. We believe, you know, this is a very, very good trend for lotteries to undertake, especially with the significant increase in demand for scratch tickets. I think it provides an opportunity, and I think it's good risk management for the lotteries to utilize multiple vendors. That's certainly something that we support, not being the incumbent in so many markets. We talked about being able to have the capacity and the quality to deliver, and I think those things take time, and I think we've given our investment in our facility in Lakeland. I think the satisfaction that our customers have gotten comfortable with in our quality, including our recent innovation, I think is something that gives us a lot of credibility and the opportunity to grow that business over time. Great. Thank you. Regarding M&A, just given your strong cash position and balance sheet and reduced valuations out in the market, how are you thinking about additional opportunities for M&A? Thank you. Yeah, we've got a really great internal strategy team, so you know, we're very aware of what's out there in the marketplace. You know, the areas that we continue to be focused on are around our high-growth digital business, both on the iLottery side as well as on the iGaming side. We're pretty selective. We feel as if we've got a pretty strong portfolio of games and a very strong best-in-class operating platform in those areas. You know, we continue to look at studios, and we continue to look at technology to see if there is, you know, anything that potentially could, you know, could be additive, at the right value. Nothing to talk about here specifically but we've said in the past, those are the areas that, we're most focused in. Perfect. Very helpful. Thank you. I will now turn the call over to Vince Sadusky for some final closing remarks. Okay. Well, thank you all for joining us. As you've heard, 2023 is off to a great start with Q1 results, experiencing good momentum across all of our operating segments. Our strategy to grow, innovate, and optimize is achieving the results that we'd anticipated. As a reminder, you know, we've got a very strong balance sheet and access to great liquidity. We think we can continue to create great value for our shareholders as we progress towards our 2025 targets. Thank you again on your interest at IGT, and have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.