International Game Technology PLC (IGT) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the IGT 2018 Third Quarter Results Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the call over to Jim Hurley, Senior Vice President of Investor Relations. Sir, you may begin.

Thank you, and thank you all for joining us on IGT's third quarter 2018 conference call. Marco Sala, our CEO, will provide an overview of the quarter and comment on broader strategic initiatives. Then Alberto Fornaro, our CFO, will provide operational and financial perspective on the results. After our prepared remarks, we'll open the call for your questions.

During today's call, we will be making some forward-looking statements within the meaning of 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 SEC filings.

And now I'll turn the call over to Marco Sala, CEO of IGT.

Thank you, Jim, and welcome, everyone. We are reporting a strong third quarter result today. Adjusted EBITDA of $443 million reflects solid KPIs for both lottery and gaming. We also benefited from high-margin lottery product sales and disciplined expense management. Our year-to-date performance is equally noteworthy with adjusted EBITDA up 7% at constant currency and scope, reflecting exceptional results at our Italy and international segments. Same-store revenues for instant and draw-based lottery games were up mid-single digits in our North America and International segments during the third quarter. Italy lottery revenues were also up mid-single digits in the period. Multistate jackpot activity were considerably lower, mostly due to the comparison with a large North American Powerball jackpot last year.

Instant tickets continue to be the main driver of growth in North America, on demand for higher-priced, large-format tickets. We have also had great success with high-profile license properties such as The Voice and Wheel of Fortune, which we leverage across the IGT franchise.

The addition of our new printing press at the beginning of the year has driven a 20% increase in the number of games printed. We have recently secured instant ticket printing contract extensions in Texas, New York and Idaho.

The international lottery business was strong across our operations and notably in the EMEA region. We realized good growth in the U.K., thanks to strong instant ticket and EuroMillions jackpot sales. We also secured a large multi-year software license as part of contract amendment with Veikkaus, the Finnish lottery operator we have supported for the last 30 years. Veikkaus is widely recognized as one of the world's most sophisticated lotteries, and we are proud of their endorsement of our capabilities.

In Italy, total lottery wagers increased 2%, continued 10eLotto momentum and the contribution from MillionDAY more than offset a modest decline in Scratch & Win, which had tough comparisons to last year's third quarter relaunch of the Miliardario games. Year-to-date, lotto wagers were up over 7%, and Scratch & Win wagers are up nearly 2%.

I'd like to spend a little time on the Italy segment because its performance is especially noteworthy. Revenue increased approximately 4% in constant currency for both the third quarter and year-to-date period. Operating income has grown at even stronger rate, up 17% in the third quarter and 9% year-to-date. The results underscore the vitality of the gaming market in Italy and the extraordinary operational discipline and effectiveness of our Italy team. They have been able to grow the top and bottom lines while overcoming the impact of higher taxes and some regional restrictions on gaming machine as well as a significant reduction in AWP units.

Now I'd like to give you our perspective of the -- on the impacts of the regulatory measures that have been enacted in the Dignity Decree or are proposed in the new budget law based on what we know today. You may recall that the Dignity Decree in both the number of items, including increased taxation, advertising ban, warning labels on instant ticket and an age verification provision for the lotto machine. The proposed budget law includes a provision for an additional 50 basis point increase in taxation for VLTs and AWPs. When we assess these items in total and consider the things we can do to mitigate some of them, we expect that the EBITDA impact to be in the range of $15 million to $20 million in 2019. To be sure, these are issues that require the close attention of the team, but I'm confident that it is a challenge that can be successfully managed and our team has a great track record of doing just that.

Let's turn now to the Gaming business. Our global installed base was approximately 2% above the prior year, including the first year-to-date increase in North America since the acquisition. Sequentially, the install base and yields were stable in North America, supported by Wheel of Fortune franchise, especially the Gold Spin and MEGATOWER games, as well as for Megabucks, Fort Knox and The Voice.

We shipped over 7,000 gaming machines in the third quarter, 10% more than the prior year, with good growth in both the North America and the international segments. Replacement unit sales for North American casino customers were up mid-single digit in the period. We experienced strong demand for our Crystal series cabinets and new games content such as Scarab, Solar Disc, Wild Fury and Mistress of Egypt. We have seen higher ASPs as a result.

International unit shipments increased double digits, and they are also enjoying higher ASPs. We saw particular strength in Australia, where new games like Star Stax and Fortune Gong are gaining momentum. Building on the recent introduction of CrystalCurve in Australia, we launched the Crystal 27 and the CrystalSlant cabinet at the Australian -- Australasian Gaming Expo in August. Both are well received by customers.

Speaking of trade shows, we recently attended both NASPL and the G2E North America, and customers' response was encouraging. The sales funnel for our video core products are coming out of G2E is the strongest we have seen in the last 4 years for both the North America and international customers. The depth and quality of the games on the CrystalCurve and Crystal 27 cabinets were the highlight. Upcoming titles, the Fortune Coin and [Uphill] were especially popular at the show.

On the premium side, we featured several MultiLink, progressive and upgraded merchandising. Progressive titles garnering the most interest were: Fortune Link, Dragon Life and Wheel of Fortune Cash Link. The Price is Right, especially the Showcase Showdown on the MEGATOWER cabinet, was another highlight.

Our PlayDigital organization was a focal point at both NASPL and the G2E. PlayDigital encompasses IGT's full suite of digital platforms, content and solutions that address evolving lottery and casino customers and player needs in this dynamic channel. In fact, it was the first time we presented our suite of digital offerings in such comprehensive way.

PlayShot, our fully integrated sports betting solution for lottery and gaming customers, received the most attention. Lottery customers were especially impressed with our ability to deliver a full outsource of sports betting solution through our exclusive partnership with William Hill. And while our mobile capabilities are important element of our offerings, lottery and casino customers were equally interested in our land-based sports betting offer.

The GameTouch Draw is a new Lottery self-service terminal modeled after what we recently deployed in Italy. It supports the sales of Keno and other draw games in bars and social spaces, and can also be a key for sports betting.

The CrystalBetting cabinets that we debuted at the G2E features the opportunity to place bets while simultaneously watching a live event in a personalized space. Our more compact QuickBet kiosk was also interesting to casino customers. Our goal is to consistently bring innovative content and technology to the market. The solutions that we presented at the recent trade shows were our strongest offer to date of market-ready games, cabinets and systems.

With strong organizational foundations in place and a fully realized roster of compelling solutions, we are better positioned than ever to deliver on our goals. As our year-to-date results suggest, we are firmly on track to achieve the financial and strategic objectives we set for 2018.

Now I turn the call over to Alberto.

Thank you, Marco, and hello to everyone joining us on the call today. A summary of our third quarter results are presented on Slide 8.

Consolidated revenue decreased 4% at constant currency. About 1/3 of the overall decline was related to ASE 606. Solid growth in Italy in global lottery same-store revenue was more than offset by comparisons with specific nonrecurring items and elevated product sales in the prior year.

Adjusted EBITDA grew 4% at constant currency on strong Italy performance, an improvement in product sales margin and disciplined expense management. Adjusted operating income reflects higher depreciation related to recent lottery wins and extensions and upgrading our global installed base of gaming machines. Adjusted earnings per share was $0.31 compared to $0.40 in the prior year, primarily due to a higher effective tax rate.

Let's now review the results of each of our operating segments beginning with Italy here on Slide 9. It was another very strong quarter for Italy. Revenues increased 4% at constant currency with contribution coming from all Gaming business. 10eLotto wagers increased by nearly 8%. MillionDAY, which we introduced in February, generated EUR 47 million in wagers. Scratch & Win wagers were only modestly below the prior year on the difficult comparison with the relaunch of the Miliardario franchise in the third quarter last year.

In machine gaming, overall wagers were up slightly due to strong productivity gains from both AWP and VLT machines. This more than offset the impact from state-mandated reduction in the number of AWPs, higher gaming machine taxes and certain regional restrictions on gaming machines. The higher sports betting revenue is a combination of a 10% increase in wagers, coupled with a lower payout percentage. Based on October trends, we expect the fourth quarter payout to be above the prior year period.

Operating income increased significantly, up 17% at constant currency, reflecting the high-profit flow-through from all Gaming business as well as disciplined cost management.

Our North American Gaming & Interactive segment is shown on Slide 10. Adjusted for the jackpot expense reclass, revenues were down 5%, primarily due to a large software sale in Oregon in the prior year. The installed base increased by more than 430 units or 2% from the prior year, the first year-over-year increase since the IGT acquisition in 2015.

Gaming service revenue was essentially stable on an underlying basis. Yields and install base were stable sequentially. Product sales reflected the Oregon software sales in the prior year. This year, product revenue from terminal sales rose 16%, supported by growth in casino replacement and VLT units.

We also benefited from higher ASPs. Operating income reflects the comparison with last year high-margin product sales mix, increased depreciation associated with upgrading the installed base and larger jackpot expenses due to the timing of the jackpots.

Now let's turn to North American lottery on Slide 11. The underlying health of this business is strong. The declines depicted on this slide come from known items such as tougher jackpot and product sales comparisons to the prior year and lower pass-through revenue and LMA revenue. Same-store revenue from instant ticket and draw games was up nearly 5% in the quarter, while multistate jackpot games faced a tough comparison to very strong Powerball activity in the prior year. Instant ticket growth was primarily driven by high price points tickets and large customers like Texas and Michigan. Lottery Service revenue included impact of the lower effective rate in California, which we will anniversary during Q4.

LMA revenue was impacted by lower pass-through revenues from Illinois. As we mentioned in the past, that pass-through revenue has no associated profit. In product sales, we saw growth in instant ticket printing in the quarter faced -- but faced a tough comparison to the prior year where we have large VLT Central system and lottery terminal sales. Operating income was down on lower revenue and higher depreciation associated with recent contract wins and extensions.

Let's now turn on our International segment on Slide 12. The revenue comparison primarily reflects specific nonrecurring items that benefited the prior year period. In lottery, overall same-store revenues grew almost 4%, driven by contribution from instant draw-based games and jackpot games, lower non-wager-driven revenue offset this growth.

Gaming service revenue declined primarily as a result of those specific nonrecurring items that I just mentioned. In addition, a jackpot reclass had a $3 million impact. Gaming service revenue from terminal rose 7% at constant currency from growth in the installed base.

Product sales revenue was up sharply, benefiting from a large multiyear contract amendment and associated software license to Veikkaus in Finland. It is important to note we originally expected this amendment in fourth quarter. Gaming machine units were also strong, increasing by over 400 units or 14%, primarily on new and expansion activity. The average selling price was also higher.

Operating income was up significantly, driven by the high-margin software sales and disciplined expense management.

Our debt and leverage profile is on Slide 13. Net of FX, leverage was stable despite the upfront fee and payments to minority partners.

On Slide 14, we have included our current debt maturity profile. Year-to-date, we have refinanced over $1.3 billion in debt and have extended our average debt maturity to over 4 years, derisking our near-term capital markets exposure. This leaves approximately $1.4 billion in debt maturing by the end of 2020. We have plenty of liquidity with close of $2 billion in capacity under our existing revolving credit facility as well as $450 million in cash on hand at the end of the third quarter. Approximately 70% of our debt is fixed-rate debt. The remaining 30% of floating rate debt is denominated in euro, which has a lower cost.

Cash flow for the first 9 months of the year is shown on Slide 15. Cash from operation was $249 million, including $366 million in upfront payments related to the Italian Scratch & Win license. In the fourth quarter, we have the final upfront payment totaling EUR 450 million. As a reminder, we are responsible for 64% of these upfront payments.

Gross dividends and return of capital payments to minority partners totaling $192 million were largely offset by $136 million in contributions to fund the Scratch & Win upfront payments.

Our updated outlook for 2018 is included on Slide 16. We have narrowed our outlook for adjusted EBITDA to $1.74 billion to $1.78 billion, the top half of the prior range. This includes a shift in timing of the 4,000 Sweden VLT unit shipment originally planned for the fourth quarter of this year to 2019. Our outlook includes approximately $20 million benefit from recent North American jackpot activity. As a reminder, we have absorbed $28 million in adverse FX translation since providing our initial EBITDA expectation for the year. Our outlook for capital expenditure remains unchanged.

At this point, we would like to open the call for your questions. Operator, could you please start the Q&A session?

(Operator Instructions) And our first question will come from the line of Carlo Santarelli with Deutsche Bank.

Just for starters, I wanted to just kind of go over something you said, Alberto. You talked a little bit about, I believe it was Finland that was expected to be fourth quarter and ended up in the third quarter. And previously, you guys have talked about within the context of your guidance, the fourth quarter being modestly better than the 3Q when you were kind of putting guidance framework together for the back half of the year as of your 2Q earnings report. Do any of the changes or timing of anything that you saw change that view? Obviously, you have a little bit of a tailwind here coming from the domestic jackpots that will hit in the fourth quarter. So how should we be thinking about kind of that cadence of 3Q to 4Q now?

Carlo, as I said, Finland, we were affected in Q4. And that's why our estimation -- initial estimation for Q3 were lower and we provided a better outlook for Q4 from a qualitative point of view. Now the fact that Finland has been included in Q3, obviously, reduced the contribution for Q4. And also, let me mention that originally, we were planning for Sweden to be in Q4, it's 4,000 machines, so it's a larger shipment that will go to 2019. Obviously, the fact that the jackpot in the fourth quarter is performing better and we have estimated that impact is around $12 million -- $20 million, sorry, $20 million is supporting the fact that we are guiding you to the upper half of the guidance that we previously provided and absorbing, again, a little bit more of the foreign exchange impact that we originally estimated in $26 million.

Great. Great. And then Alberto, just to go back to the comments that Marco made earlier as it pertained to the most recent regulatory changes. $15 million to $20 million was, I believe, the mitigated impact, correct? And that is not inclusive of the prior decree. This would be the incremental $15 million to $20 million on the current budget law, correct?

Carlo, it's Marco replying to your question. No, the answer is these $15 million, $20 million in '19 includes everything, the Dignity Decree plus what we know so far about the budget law. It is clear that, as you have said, that these imply a set of actions we have already decided in order to minimize the impact of the increased taxation. So this is a very key point. So $15 million, $20 million in 2009 -- $15 million, $20 million in 2019 is the full impact of Dignity Decree plus what we know so far about the budget law.

Perfect. And then lastly, obviously, a lot of buzz around your product at G2E, and I think you guys spoke to it in the prepared remarks a little bit. But I did want to ask, obviously, the 3Q tends to be seasonally slower from a participation placement standpoint. And obviously, you guys were able to kind of inch out a little bit of sequential growth. Do you guys still feel fairly comfortable coming out of G2E with the ability to continue to drive sequential expansion of your participation base in the U.S.?

I think that what we feel is that we will stabilize for this year the -- our install base. And we have a positive outlook for next year of a moderate growth.

Our next question comes from the line of Chad Beynon with Macquarie.

I wanted to start with capital allocation. I know you guys have been very vocal about this. And I think we all know the answer, but just wanted to ask it again. Is there any change in terms of how you think about leverage targets, which I believe you said at the end of the quarter was 4.27 before the last payment, so it'll tick up a little bit? And with respect to kind of your leverage goals, do we need to hear kind of a resolution or finalization of the Italian budget law before you get more comfortable doing anything there? Just the kind of an updated view on capital allocation and what the levers are there.

Chad, there is no change basically. And what we are doing is looking at the overall business that we have looking at 2019 and so on. At a certain point, we will have a more updated projection for the future. But there is no change.

Okay. And then also in the regulatory department, could you just update us on the status of the Brazilian instant ticket RFP, if there's a deadline in terms of the proposals there? And if you view the end of the election and kind of the outcome as potentially a positive, whether it's for lottery or for gaming, as you guys see it internally?

Chad, it's Marco. You're right, a new RFP for the instant ticket concession was issued in late September and this is due at the end of November. The most important change in the new RFP was a staggering of the upfront fee over a 3-year period. Of course, there is a lot to consider when investing in a greenfield opportunity like this, because at the end of the day, this is a greenfield opportunity, especially when there is a significant upfront payment associated with it. Having said that, it is a compelling opportunity, and we are assessing it quite seriously. Regarding the outcome of the political election, it's too early to say. Let's see when the government takes place, and we will assess their willingness to move forward with privatization and regulation in the gaming market more clearly than what we can do today.

Our next question comes from the line of Cameron McKnight with Crédit Suisse.

A question for Alberto, first. In terms of cash flow in the quarter, it looked like there was a bigger working capital swing in the third quarter. Can you talk about drivers of that? And should we expect that to release in the fourth quarter or first quarter next year?

Cameron, we have expected, as I said, we still and despite the VLT in Sweden, we still are expected a strong fourth quarter in terms of product sales. So as you have probably noticed, there is an increase in inventory. And obviously, we are planning in Q4 that this increase will be absorbed. Other than that, the third quarter, actually, it has been quite good because the cash flow generation was, in terms of free cash flow, was higher than $100 million. And normally, it's a quarter where, because we paid the interest expense, is seasonally not so strong. So overall, I think in Q4, things should get better and particularly for what is related to the inventories.

Okay, perfect. And is $450 million to $550 million still 2019/longer-term guidance for free cash flow?

Yes, no change.

Fantastic. And then finally, could you talk about the drivers of the significant -- or perhaps elaborate on the drivers of margin upside in Italy and in international lottery and gaming in the quarter-end? Should we extrapolate these out going forward? Or was this more driven by high-margin software sales and some things that hit in the third quarter?

Okay. Regarding Italy, obviously, an increase in revenue, particularly coming from certain parts of the business, has a very important impact on the profitability. So if the revenue increase is maintained, that improvement in the margin, if we continue to control cost, will be still visible. For what is related to the international and you look at the overall margin, certainly, when we talk about license software, it is an important impact on the margin. However, I need to stress that on the product sales side we had in this third quarter, sure, there is an improvement in the margin for the international, which is quite encouraging. And lastly, let me clarify one thing related to your question before. The $450 million to $550 million, for clarity, I just would like to remind everybody, includes the minority payment, okay?

Got it.

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

My first question is on the Italian market and looking at...

Domenico, we can't hear you. Domenico, can you please speak up?

Sorry, sorry, sorry. It was on mute. My first question is related to the Italian market. And I'm trying to, well, looking at your numbers, clearly, there is a good improvement in gaming consumption in general. But what your feeling on what's going on considering also the concern that are on the Italian in general. And the second question, in particular on the Italian market, since September 1, we had an increase in the first impact of the Dignity Decree. I'm trying to understand if you have mitigated this through a reduction in payout, in particular on VLTs? So what are the actions that you have taken to mitigate the impact? And the second question is more, if you can share with us some preliminary consideration on 2019 moving forward? Not talking about quantitative numbers target, but just to give us some feel on the main contributors to the picture for '19.

Domenico, talking about the Italian market, the first thing I have to say is that the market has always demonstrated remarkable resilience to macroeconomic and political shocks. Our pro forma was not impacted by 2008, 2009 crisis that affected other industries and companies. And notwithstanding what you just said about the decree, the Dignity Decree measures, our performance this quarter is in excellent performance. All in all, the reason for that is because there is a very strong demand for gaming in Italy that is totally resilient, that has been proven, totally resilient to the economic downturn, so the economic situation in general. It is clear that when you are facing increasing taxation, you are putting in place all the measures to mitigate the impact on your P&L. In this regard, for sure, the adjustment in the payout of VLTs -- by the way, we did very successfully. Because it's a couple of years that we are adjusting the payout of VLTs without having an impact on wagers. On the other hand, we are also reviewing all our processes to serve our customers in their gaming machine field. We have reorganized our structure also because of the reduction of AWPs. And we are constantly revisiting our way to operate in order to extract cost that allow us to recover part of the impact of the increased taxation.

So all in all, I think that the measures that are now embedded in the budget law that goes to the parliament are for an increase in taxation of 50 basis points that we feel are manageable for the reason that I've just mentioned. At the end of the day, if it remains as it is at the end of December when it will be formally approved, we will have an impact of $15 million, $20 million for the full 2019 that I consider manageable as it has been managed in the previous years.

May I just follow up on this? Just to say, how do you see the market also reacting and moving? Have you seen in general a repricing or reformulation of the payout in the market?

As you perfectly know, Domenico, there is little room for AWPs -- or no room, sorry, for AWPs. So there is -- you have just to look at the cost. I guess that everybody in the market will try to adjust the payout of VLTs in order to minimize the impact of the increased taxation in their P&L.

Domenico, this is Alberto. Regarding the outlook of 2019, obviously, we will provide the update in our next call. However, there are some qualitative elements that we can share with you. And the outlook is pretty much in sync with what we have said at the Investor Day in the sense that we still anticipate the same-store revenues for instant and draw-based games, in lottery expected to grow at low- to mid-single digit over the medium term, and so the same we are expecting for 2019. For gaming, we expect the market to be at least stable with 2018 levels. The good news is now that having shifted the VLTs in Sweden from 2018 to 2019, we will have the benefit from the VLT market in the international region. Regarding some of the headwinds, we have already talked with Marco about the headwinds on the gaming machine taxes in Italy, an estimated $15 million to $20 million at EBITDA level for next year. We are not going to plan, as you know, an elevated jackpot activity like the one that we had in the fourth quarter because it's not in our control. The other 2 items I would recall that you already know is that Illinois supply contract, that will end. And the other one is if the FX remains at this level, we will have a negative impact on EBITDA compared to 2018, but we will have the benefit on our total debt.

(Operator Instructions) And our next question comes from the line of Barry Jonas with SunTrust.

Just a couple of questions. So starting with North America Lottery. Clearly, we've seen larger jackpots with the Mega Millions rule changes and Powerball continuing strong, but are you seeing any more jackpot fatigue otherwise or any cannibalization with Mega Millions?

No. So far, we are not seeing it. We -- I think that there will be a normal evolution of jackpots, and we do not expect a major cannibalization between the 2 games.

Let me add this. Maybe compared to the past, sales were a little bit lower given the level of the jackpot. But the fact that we had 2 jackpot at the same time has probably impacted it.

Understood. And then, just next on North America, for U.S. sports betting, the teams made great progress there. I guess I'm just curious if you have any sense when we'll start seeing a meaningful impact to your EBITDA?

I think it takes time, Barry. We need to see how the regulation will evolve. We are positive because I think, as you have said, we did good progress. Our solutions are up and running in about 20 properties across Nevada, New Jersey, Mississippi, West Virginia. And also, our digital and mobile solution is live in Nevada and New Jersey. But talking about significant impact on EBITDA will take time, and so we cannot anticipate at this juncture.

Great. And then last one for me, can you maybe just talk a little bit about the Canadian VLT market? Seems like that market is moving to maybe more regular replacements as opposed to historical lumpier trends, so just would love to get your take on that evolution.

I think you're right. I think instead of having a replacement concentrated in a period of time, we are looking at these with a more, let me say, with a pace that is more spread across the years. And so I agree with you. We will start having these from the next years in a more, let me say, a more regular pace than before.

Our next question comes from the line of David Katz with Jeffries.

You've covered a lot of stuff already. I just wanted to go back to the domestic premium installed base, the U.S. premium installed base. And I believe when we've talked about it before, we're starting to see units grow and thinking about the win per day on that as perhaps lagging some of the growth but eventually should turn north? Presumably a fairly accretive metric, so I'd like to shape the cadence on that properly.

David. So far, what we have seen is basically stable yields, and in the quarter, stable sequentially installed base. That's where we are today.

We should at some point expect to see that win per day grow along with the installed base. Is that a fair assumption? Or am I misinterpreting that?

Well, it depends. It depends obviously, on the quality of the games. For us, for this year, we wanted to stabilize the installed base, and it was the first important step to reach. But I agree that in the long run, if you wanted to improve the numbers in the units, obviously, the yields were up.

Okay. And just one last one, Alberto, I heard all your commentary, you know, qualitatively about 2019. Do you expect to guide -- when should we expect a more fulsome set of guidance around 2019?

We normally give it with the results of the fourth quarter, and we are anticipating the same for this year.

Our next question comes from the line of John DeCree with Union Gaming.

Just 2 quick ones for me. I wanted to follow up on Barry's question about sports betting, maybe ask it a little differently. I was wondering, Alberto, if you could give us a little color on how we should think about, albeit small right now, the kind of contribution. Is there kind of a onetime sale associated with sports betting contract and then a recurring revenue component? And even though it's small, is it -- is that revenue profitable today? Or is there some kind of start-up costs that will need to ramp as you go forward with sports betting?

As I mentioned before, I don't know if it was with you, we don't have the perfect average contract for sports betting. The contract is quite different one from the other. In general, we have fees associated with that, that are in some way linked to the net revenues generate -- the net wagers generations. So far it is, in terms of revenues, it's relatively modest. What we can say is obviously the most important -- so you can imagine that the most important wagers are generated in region where the sports betting was already either ready to go or allowed like Nevada and New Jersey and smaller in the new states like Mississippi and West Virginia.

A quick follow-up, Alberto. When you kind of deploy a new contract with new customer or enter new space, is there some CapEx associated on your side with that sports betting rollout or contract? And would that be kind of on a case-by-case basis as well?

There could be some CapEx, but it is very, very modest. If there is a lot of customization required or it's the first contract in the jurisdiction, there could be some, but it's very, very small.

Okay, that's helpful. And then to shift gears, one more question on kind of North America Gaming business. You've talked a little bit about higher ASPs in the quarter. I was wondering if you could give us a little bit more color on that. Sorry, if I missed it in the prepared remarks. Was it a product mix shift relative to last year or higher price units on your side? Any color on pricing would be helpful.

Yes. No, the higher ASPs is basically driven by the new cabinets that have been introduced and that's it. Sometimes, it could be impacted by the mix between the VLT or casino games. But for the VLT sales, for us, are important. But for what is related to the recent quarter, it has been driven by the new product introduction, new cabinets in particular.

And we have a follow-up question from the line of Domenico Ghilotti from Equita.

Yes, I have a follow-up. Just a clarification on International division, the reason for the decline in the install base quarter-on-quarter?

If you look at the progression of the last quarters, you see that we grew quite significantly. And in this sequential decline of the commercial casino installed base primarily reflects the impact of conversions, mainly in Africa and Latin America, where some units of the customer asked to buy and after having improved our installed base significantly over the previous quarters, we agreed to convert some of the machines they had in their floors.

Okay. Should we expect that the trend is -- so the underlying trend is a still positive trend?

Yes. I think over the next quarters, we will continue to grow the install base in the international part of the business.

And are you a bit more satisfied with the performance in Greece? Or?

They're improving. Yes, thank you for asking. We are improving our performance significantly. As I said in one of the previous calls, we were not completely happy with the performance of our machines in Greece. And now the performance, thanks to the new games we introduced in the market, is more positive, and overall, our performance is satisfying us.

Thank you. And I'm showing no further questions at this time. I would now like to turn the call back to Marco Sala for closing remarks.

Thank you for joining us today and for interest in IGT. Have a good day. Bye-bye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.