Good day, ladies and gentlemen, and welcome to the IGT 2019 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. 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 first quarter 2019 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 comments. During today's call, we'll 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 SEC filings. And now, I'll turn the call over to Marco Sala..

Thank you, Jim. And hello, everyone. This year is off to a solid start. Our first quarter results confirm the vitality of global lottery business and the progress we have made in sales of gaming machines. Revenue and adjusted EBITDA were stable with the prior year at constant currency, supported by the Italy and North America Lottery segment.

This is significant considering the impact of Italian gaming taxes as well as the challenging comparison with the first quarter of 2018 when our performance had benefited from exceptionally high system sales and elevated North America jackpot activity.

Global lottery same-store revenues outside Italy were up 3% in the quarter, led by a 5% increase for instant and draw games. It is important to point out that this growth came on top of the 9% increase achieved in the prior-year period. In North America, the sustained mid-single-digit same-store revenue growth for instant and draw games is noteworthy.

The United States is one of the world's most developed lottery market on a per capita basis and the continued revenue growth is impressive. During the first quarter, larger lotteries such as Texas, Michigan and North Carolina registered higher-than-average same-store revenue growth, including double-digit increases for instant tickets.

This was driven by price point and price optimization strategies, in addition to the successful promotion of proven concepts such as multiplayer games. In the International segment, same-store revenue growth was strongest in Europe.

In the United Kingdom, double-digit same-store revenue growth was the result of optimizing the instant ticket portfolio and higher EuroMillions jackpot activity. Once again, Italy lottery results exceeded expectations. Lotto wagers rose more than 5% on top of the 9% increase in the prior-year period. Scratch and win wagers was stable.

10eLotto remains the main driver of growth, supported by an increase in the total number of bids. We also saw a stabilization in core lotto wagers during the quarter. Growth in Italy lottery wager is fueled by product innovation and effective portfolio management. We are planning exciting new launches for all our main lotto games to sustain this trend.

While we are satisfied with the growth-based momentum of our global lottery business, we continue to see mixed results from gaming. We have made good progress on sales of gaming machines, but we have more work to do on the installed base of leased machines. It was a strong quarter for gaming machine shipments.

Total global units were 20% greater than in the first quarter of 2018. In North America, sales of replacement units to casinos customer increased 6%. New and expansion units were up considerably due to the upcoming Encore Boston Harbor. Once again, we achieved record average selling prices in North America.

The other 40% increase in international unit shipments included the growth-based geographic replacement growth. New and expansion activity was also up. The Crystal Series cabinet, especially the Crystal 27 and CrystalCurve are driving our global growth.

The rapid adoption of the Crystal Series reflects the quality of our games, sustained demand for high-performance titles like Ocean Magic Grand and Golden Egypt Grand was enhanced by the introduction of new titles, notably Fortune Coin in North America and Fortune Gong internationally.

The acceptance of Ocean Magic Grand on the CrystalCurve represents the execution of the strategy to develop extensions of proven games and leverage them across our portfolio of cabinets. We recently launched the CrystalSlant Poker cabinet in the Las Vegas market, leveraging our leadership in video poker.

While the longevity of older poker machines is impressive, we expect that the strong performance of the new cabinet to be an important driver of replacement unit demand. We made some good progress [Technical Difficulty] systems even if we didn't match last year's exceptional level.

We recently completed the three Advantage installations in North America at the Emerald Queen, Monarch Casino Black Hawk and MGM Northfield. In each case, we replaced an incumbent. Our Advantage system will soon go live at the Encore Boston Harbor and we have several other opportunities in the works.

When it comes to these games, we are making progress, but we are not yet where we want to be. The decline in North America installed base primarily reflects the removal of older cabinets we are no longer supporting.

This masks the momentum of the Wheel of Fortune franchise with new games such as Wheel of Fortune 4D, Cash Link and the Gold Spins or the Megatower cabinet. Blake Shelton and Fortune Gong are also gaining traction and we continue to see nice growth from the release of new Class II content.

We expect the launch of the Price is Right to support improved installed base trends in the second half of the year. Internationally, removals due to the last year's large South Africa conversion sales are partially offset by continued VLT expansion in Greece where IGT has developed three of the market's top five performing games.

Italy gaming machine performance is a remarkable story. Better-than-expected wagers for both VLTs and AWPs helped mitigate the impact of higher taxes. In response to this year's budget law, we have begun reducing payouts and expect to be done by September. The development of sports betting in the US continues to evolve.

IGT's sports betting solutions are currently operational in six states. Our QuickBet kiosks are live in New Jersey, Mississippi, Rhode Island and we expect to introduce them in Pennsylvania soon. IGT's digital offer is powering FanDuel's market-leading position in New Jersey's online sports betting.

Our fully integrated solution is designed to meet the specific needs of the US sports operators. With things evolving at a fast pace, we are well-positioned to have a clear strategy for [Technical Difficulty]. Looking at the remainder of the year, we have set key priorities for 2019. First, to grow revenue and profits from gaming.

Second, to announce and innovate with the lottery products across all regions. Third, to strengthen market share in Italy and minimize the impact of regulatory changes there. And finally, to drive free cash flow generation. So, while we have more work to do, our first quarter results confirm we are on the right path.

Now, I will turn the call over to Alberto..

Thank you, Marco. And hello to all of you on the call today. Our first quarter results are summarized on slide 10. As you can see, the impact of the stronger dollar against the euro on reported numbers was significant. I remind you that Q1 2018 average euro/dollar rate was $1.23 versus $1.14 for Q1 2019.

At constant currency, revenue was almost stable compared to the prior year. Strength in global gaming unit shipments and continued growth in global lottery same-store revenue helped offset the impact of increased gaming machine taxes in Italy and the lower gaming system sales compared to the prior-year period.

Adjusted EBITDA of $417 million was stable at constant currency, supported by the Italy and North America Lottery segment. Adjusted EBITDA would have been approximately $2 million higher at $1.15 euro/dollar rate assumed in our outlook.

SG&A and R&D came in slightly better than the prior year, partly due to good cost discipline and partly from a beneficial shift in timing of expenses in Italy. Increased corporate costs were partly related to higher legal expenses.

The decline in adjusted operating income at constant currency was entirely a result of higher depreciation resulting from investments related to both upgrading the gaming installed base and the long-term lottery contract wins and extensions. Let me now turn to our operating segments. North America Gaming & Interactive is shown on slide 11.

At constant currency, revenue was essentially in line with the prior year as the strong gaming machine unit sales offset lower system sales revenue, which was exceptionally high in the prior-year period. Revenue from the sales of gaming machines rose more than 25% as an 8% increase in unit shipments was accentuated by higher average selling prices.

This is the fourth consecutive quarter of ASP growth fueled by customer demand for new cabinets and top performing games. The decline in replacement units is entirely due to fewer VLT unit shipments. As Marco mentioned, replacement sales to casino customers increased in the quarter. New and expansion units include shipments to Encore Boston Harbor.

Overall service revenue was stable on revenue from large multiyear poker contracts. This was partially offset by lower terminal service revenues from a decline in digital base, primarily from removal of older cabinets. Consistent with the fourth quarter of last year, yields were impacted by a shift in the overall product mix.

The decline in operating income was driven by a lower margin on service revenue where the reduction in units and average yield and higher depreciation expenses were only partially mitigated by the multiyear poker contract. Profits from the significant increase in gaming machine unit sales mostly offset lower sales of high-margin systems.

Operating expenses were relatively stable. Turning to North America Lottery on slide 12, revenue was stable. Overall same-store revenue growth of nearly 3% was fueled by a 5% increase in instant tickets and draw games.

Jackpot activity was down from the first quarter last year, which included four significant jackpot prices, each exceeding $400 million. This made for a tough comparison even with the $750 million Powerball jackpot in March of this year.

Two other important drivers of lottery service revenues were the conclusion of the Illinois supply contract in late February and the recovery on certain service-level agreements provision that we had incurred previously. LMA revenue reflects the timing of lower pass-through revenue in New Jersey. As a reminder, this revenue has no associated profit.

Lower product sales revenue reflects the large volume of lottery retailer terminals to Massachusetts last year. Gaming service revenue rose on growth in an online jackpot game in Canada. Operating income was stable at constant currency.

The service level agreement recoveries and the cost discipline more than offset high profit flow-through from elevated jackpot activity in the prior year and higher depreciation associated with contract wins and expansions. Now, let's turn to the International segment on slide 13.

As you can see, foreign currency fluctuation had a material effect on reported results. Revenue was stable at constant currency, as was operating profit. When we exclude $5 million of settlement costs related to our Colombia lottery contract and related to an arbitration on commercial services.

Total product sales revenue was up 4% at constant currency as a 40% increase in gaming machine unit shipment drove a 22% increase in terminal sales revenue. This was partially offset by lower system sales as we had the larger Advantage implementation at MGM Cotai in the first quarter of last year.

The unit shipment growth was broad-based across geographies. Lower ASP were a function of overall geographic and product mix and related discounts as we sold a higher percentage of older cabinets. The decline in gaming service revenue was primarily due to lower interactive revenue and reduced contribution from commercial gaming installed base.

The year-over-year decline in the installed base is the result of a nearly 1,500-unit South African conversion sales in the fourth quarter of 2018 that was partially offset by continued expansion of Greece VLT. On a sequential basis, the installed base increased 180 units.

Lottery same-store revenue growth benefited from a 3% increase related to instant ticket and draw games and an 8% increase from jackpot games. It was another strong quarter for Italy, whose results are on slide 14. At constant currency, revenue was down 2% as growth in lottery partly offset the impact of increased gaming machine taxes.

As you can see, the euro/dollar exchange rate had a significant effect on reported results. Total lotto wager rose by over 5%, driven by steady growth in 10eLotto. The small drop in scratch and win wagers reflects one fewer day of sales as compared to the prior period.

The performance of the multiplayer family of games was able to match a high base from last year's successful Miliardario. The decline in machine gaming revenue is entirely due to higher taxes. Increased productivity of gaming machines was evident as a 21% reduction in AWP units year-over-year resulted in a less than 2% drop in wagers.

VLT wagers were up nicely, rising 4%. Sports betting and other revenue includes the contribution from a new commercial services offering. Operating income grew nicely at constant currency.

Approximately two-thirds of the improvement is due to a favorable shift in timing of expenses, while the balance reflecting strong lottery results net of higher gaming taxes. On slide 15, you can see the net debt and leverage were relatively stable with year-end levels. Cash flow is shown on slide 16.

Cash from operations totaled $147 million in the first quarter. This includes $184 million in cash interest paid during the period. Interest payments are concentrated in the first and third quarters, as you know. CapEx totaled $190 million, which was lower than expected, primarily due to timing.

We still expect CapEx of $450 million to $550 million for the full year, but with the weighting now more balanced between the first half and the second half of the year. Similar to last year, our board declared a dividend in March, but the payment date doesn't occur until early in the second quarter.

As a reminder, the timing of cash distribution to minority partners varies by contract, but tends to be concentrated in the second quarter. As part of the review of our asset portfolio, we have identified certain non-core assets that we intend to monetize for approximately $80 million.

The proceeds from these activities will allow us to fund new growth CapEx need in 2019 for active lottery tenders in Brazil and Turkey. It would also fund a slight acceleration of return to capital to lotto minority partners in Q2 based on strong lottery performance.

We believe this is a positive step to address some growth CapEx need without impacting our net debt. On slide 17, we have included our outlook summary for 2019. We continue to expect adjusted EBITDA of $1.7 billion to $1.76 million for the full year period at a euro/dollar rate of $1.15.

For 2019 as a whole, we continue to estimate a $40 million headwind to EBITDA from increased gaming taxes net of mitigation items. As we noted in March, at constant currency, EBITDA should be more concentrated in the second half of the year. As we think about the second quarter, there are a few things to keep in mind for comparison purposes.

First, Q2 last year benefited from a large multiyear poker contract in our North American Gaming & Interactive segment. We also had significant new and expansion gaming machine activity [Technical Difficulty].

In the North America market lottery segment, last year, we had the large lottery product sales in Massachusetts and the contribution from the Illinois supply contract. To summarize the first quarter of 2019, reflected strong global gaming unit shipment and continuous strength in global lottery same-store revenue.

Our results reflect the resilience and diversified scope of our business and products, which help offset significant headwinds from increased gaming machine taxes in Italy and higher system sales in the prior-year. At this point, I would like to open the call for your questions..

Thank you. [Operator Instructions]. And our next question comes from Carlo Santarelli from Deutsche Bank. Your line is now open..

Hey. Good morning, everybody. With respect to your outlook, and if you think about kind of historically – and I know it's always not the case, but historically your 2Q has tended to be better from an adjusted EBITDA perspective than your 1Q. I think some of that, obviously, relates to seasonal buying patterns as well as your participation base.

And you're still looking for kind of a second-half weighted EBITDA guide despite all the headwinds, with the FX rate still kind of hampering your guidance.

Do you guys feel – in terms of your outlook today relative to the outlook that you provided, I guess, it was a little over two months ago, do you feel a bit more encouraged operationally, meaning ex the FX, just in terms of the way that the core business is trending?.

I would say, Carlo – first of all, again, let's put the FX aside and we have kept the $1.15 and then we will evaluate at the end of the second quarter if there is any development there. I would say, overall, nothing has changed.

The only important changes that – in terms of timing, we have done better in the first quarter through some timing on the cost side, particularly in Italy, and [indiscernible] that has been evolved positively for us. So, therefore, the split between the first half and second half remains more or less the same.

And that's the reason why I was offering some qualitative comments regarding Q2 because the comparison year-over-year is not favorable given the fact that, last year, apart from betting, gaming machine, Q2 is sometimes better, there are other factors that impact negatively.

When we look at the overall business, I would say that we are very comfortable in gaming, in particular in product sales. We are comfortable on all the lottery.. We will see what is going to be the impact of the gaming machines in Italy, but Italy overall is performing quite well. So, we are encouraged. And we are doing some work on the installed base.

We will see how it goes in the remaining part of the year..

Carlos, it's Marco. I reiterate what Alberto is saying. I think from the operational standpoint, the performance that we have seen in the first quarter are positive, in line with our expectation, but are confirming the path we have identified at the beginning of the year. So, I think it's a good start..

Great. Thank you. And then, if I could just ask one follow-up as it pertains to Italy. Alberto, I think you said $40 million continues to be the expected impact from taxes. I also think you said you expected to have all of your remediation work done in Italy on the terminals by September.

Could you kind of give a ballpark estimate of what the – and I think maybe with some of the color that you provided, I might be able to do this myself, but I haven't yet. Just in terms of what the impact was to EBITDA in the first quarter from the tax changes..

Carlo, I can elaborate on this regarding Italy. The impact was one-third in the first quarter. I want to elaborate a little bit on the remedies. The remedies in the first quarter were not impacted by the reduction in the payout that we are bringing to market starting from the second quarter.

So, by September, we should have concluded the change of the motherboards in AWPs and we should have delivered most part of new VLT games [indiscernible]. And that is how the outlook for Italy looks like..

Sorry. You said one-third.

Is that one-third of the $40 million impact you expect?.

Yes, yes..

Okay, perfect. Thank you very much..

Thank you, Carlo..

Thank you. [Operator Instructions]. And our next question comes from Chad Beynon from Macquarie. Your line is now open..

Good morning. Thanks for taking my question. I wanted to ask about gaming, I guess, specifically in International. I know in the fourth quarter there was some noise in terms of selling some units to some markets and it looks like that was – it looks like that was cleared up in the first quarter, evidenced by your replacement number.

Could you talk a little bit more about if – looking back on that if that was a one-timer? And then, just with your sales in International, if this was kind of broad based around the world or if there's any one specific market that you're starting to grow significantly? Thank you..

Good morning, Chad. Alberto here. Let me provide you a little bit of color regarding debt. In Q4, you probably remember that the sales in International – and we particularly mentioned certain countries in Latin America and we mentioned Europe – were below our expectation.

What we have there in a couple of countries, there were news of additional gaming taxes and so on, and so the behavior of our customer was basically to stay on the fence and see what was happening.

What you have seen in these – from then, we have seen that prior plans have been reworked now, and so we see the entire year with more optimism, particularly in Latin America..

Yes. Chad, I think that our plan for this year in the International part of our business should provide as a better outlook in terms of KPIs and profitability across all the regions. I think that we are bringing to market good content. We have new cabinets. We take advantage also from the large [indiscernible] VLT unit shipments.

So, I think that the outlook for the gaming part of the international business during 2018 will confirm growth..

Okay, thanks. And then, Alberto, you mentioned that you're looking to potentially divest some non-core assets for around $80 million.

Could you elaborate a little bit more on this? If this will help reduce SG&A or improve margins or if this is just kind of a one-off non-core divestiture where we should expect for margins to be kind of where they are and this is a separate issue? Thanks..

No. Consider that the largest part of this is coming from a small divestiture of an investment that we have made that has not basically impacted operating income or EBITDA. It's an investment that we have done some time ago and it's nice there is a nice profit on it.

And we will divest, so that if we're going to be successful in a couple of bids, we will be able to generate the cash without impacting the net debt..

Okay. Thank you very much. Best of luck..

Thank you. And our next question comes from Barry Jonas from SunTrust. Your line is now open..

Hi. Good morning, guys. Just wanted to start with North American gaming operation service revenue. Maybe just a little bit more color on what's going on there.

Is the competitive environment just very tough or operators reducing footprints all around? Just curious about the environment and maybe if you can give any color on how you are addressing this? Thanks..

Yes, Barry. Both of them are putting pressure on our install based. It's a very competitive and dynamic segment, as you all know. And this is more visible in Q1 as customers review their strategy for the year ahead.

Having said that, as I mentioned in my remarks, the sequential decline in North America primarily reflects the removal of older units that are not longer support.

On the other hand, and this is where I can provide a little bit more color, I think we are having an excellent momentum for the Wheel of Fortune franchise because we are benefiting from some of the strongest new bay [ph] introductions in years. I am not referring to Cash Link.

I'm referring to the Wheel of Fortune 4D, Gold Spin that are performing in the floor in a very, very important way. And also, other placement, Fortune Gong and Blake Sheraton are providing a momentum. That is the reason why, at the end, we expect for 2019, moderate growth of the installed base compared to last year.

By the way, it happened in 2018 versus 2017 because we expect that the continued momentum of the Wheel of Fortune franchise together with the launch of the Price is Right brand, where we launch a number of games and also new games in the multi-link progressive will help us recovering the installed base over the quarters, especially in the second half and our expectation is that also including what we have done in the Class II market that is providing us good results, we expect the year-end to be able to have a an improved installed base..

Got it. Then just another question on some of the contracts that you are bidding on now.

Just an update on the timing for SuperEnalotto and Brazil and, I guess, the Pennsylvania lottery RFP as well?.

Yes. Regarding – I start from SuperEnalotto because I have nothing to report. Meaning, jokes apart, we expect it – the end of May, I do not consider it very probable. June, it appears to me at least in absence of any formal position from our regulator, that should be the moment where we should expect the outcome.

Regarding Brazil, the submission is due by the end of this week. And regarding Pennsylvania, it is at the beginning of June – June 3..

Great. And then, I have just a quick follow-up.

As we think about Italy – or when is the next cycle of concessions up for renewal, whether it's sports betting or the machines? And just curious, relative to that discussion is the increasing tax environment, how should we think about how that affects the renewal process there?.

Look, the contract for gaming machines expires in 2022. There is some time before getting there. And you're right anyway. I think that the regulator and the government should how to provide a good visibility for that time in order to give the operators the possibility to evaluate the investment.

As you can imagine, here, it is not a matter to get or not the license renewed because it's a multi-concession business, but it's a matter to understand which kind of investment case we have in front of us given the importance of taxation in this business..

Great. Thanks so much, guys..

Thank you very much, Barry..

Thank you. Our next question comes from Domenico Ghilotti from Equita. Your line is now open..

Good morning. Three questions. First is, if I'm not wrong, you were mentioning also Turkey as a contract where you can have some growth CapEx to be allocated. And so, if you can elaborate on that.

Second, on the headwind, in particular, I'm going to say, referring to – following up on the previous question, but in general, so you were mentioning $100 million headwind for this year including FX, gaming taxes and so on.

So, I wonder how much was already phased in Q1 and how much is expected for the rest of the year? And third is just a clarification. I didn't catch the point. When you were talking about Italy, you were saying that two-thirds of the improvement was probably related to just the phasing in cost, but I was not catching.

So, the two-thirds of what? What kind of improvement? Or if you can rephrase or re-elaborate?.

Okay. I will take the first question and Alberto will provide you answers on the second and the third. Turkey, there is a tender for a private manager of Turkish lottery that was recently issued. And we are evaluating it. That is what I can say at this point in time. We as a company have been the technology provider to the Turkish lottery since 1996.

And our current contract has been a standard through the end of the year. So, we have a very good knowledge of the Turkish market and we are reviewing very carefully the documentation that has been provided.

In principle, Turkey is an interesting market, but as always, it's a matter of how the private manager concession is structured before making an assessment on it..

Is there any timetable?.

I think yes, but I do not remember in this moment by when they expect. I will let you know because, I'm sorry, I'm not reminded..

Thanks..

Domenico, good morning. Alberto. Regarding the headwind that we had mentioned in the prior call, if you remember, we talk about the jackpot in North America. Regarding that – this was in Q4. So, mostly will impact that specific quarter.

The foreign exchange was for the full year, but you have seen that the impact has been pretty important in Q1 compared to the other. For what is related to Illinois, it's mostly Q2 to Q4. We had a small impact this quarter, but was minimal.

And finally, regarding the $40 million of the Italian gaming taxes, Marco just told you that one-third was in Q1 and the rest will be in the future quarters.

And then, if I understood well, you were asking about the timing on Italy expenses, is correct?.

Yeah, I was just checking. So, I didn't get the point on the improvement part was just a time shift, you were mentioning.

You were mentioning two-thirds, but I was not sure on the numbers that you are providing before the call and your comments?.

Consider it's around €8 million.

Okay?.

Okay..

The shift in timing for the costs..

Okay, thank you..

Thank you..

Thank you. Our next question comes from the line of David Katz of Jefferies. Your line is now open..

Hi. Good morning, everyone. Hi. Good morning, everyone..

Good morning, David..

Good morning. I wanted to circle back on just one matter which I think is maybe at the heart of it for us, which is, if I look at the EBITDA guidance, and I heard Alberto's commentary about freeing up [technical difficulty]..

Sorry, David. David, you've dropped out. If you could just repeat the question..

Sure. Look, just taking the commentary from Alberto and taking the guidance, it leaves us with the possibility of a fair chunk of free cash flow.

And specifically, on Alberto's commentary about freeing up some capital to deploy for growth opportunities that may occur, am I evaluating that correctly that there is a chunk of free cash flow and can you just talk a bit more about what your thoughts are on how you might deploy that?.

Yes, David. Our thinking is the following. Regarding the free cash flow of this year, a couple of these opportunities – a couple of opportunities are potentially coming to fruition. One is Brazil. We have talked about it since a while. And the second one, I think we introduced briefly the topic regarding a potential bid in Turkey.

And so, therefore, this will be incremental CapEx compared to what we were at the beginning of the year. And so, therefore, we had also the opportunity for there to basically minimize the impact on our net debt. And so, we're taking action in order to make sure that if this opportunity materializes, they will not impact the net debt.

Regarding the cash flow, at the end of the day, we will probably indicate if the definition of free cash flow is cash from operations minus free CapEx. You will not see directly an improvement of that because the divestiture will be in a separate line.

But what is important for us is make sure that the overall growth CapEx does not impact our leverage profile and that's why we took this portfolio decision in order to redeploy investment in areas where we think we can have a better return..

And if I can just follow that up and have you provide us a little bit of color about where you expect the leverage to wind up toward the end of this year and just clarify the commentary around – under 4 times, in striking distance of 4 times, how you are sort of characterizing what the goal and benchmark is?.

Again, our position, there is not a change. We need to be at 4. We said that when we have sigh of four, in the sense that we are comfortable that we reach this level in order to say that we have achieved our leverage target. Regarding this year, there are several variables that will impact. We are still some – regarding the CapEx, it could change.

There is some range around our EBITDA.

What I can say is that, obviously, we are planning for a reduction and the size of this reduction will be mostly the combination of these two items as the overall generation of free cash flow for the year, which we maintain a positive stance in the fact that we want to deliver what we have talked in the past regarding the cash flow for 2019 and 2018..

Thank you very much. Nice quarter..

Thank you. [Operator Instructions]. And our next question comes from Joe Stauff from Susquehanna. Your line is now open..

Thank you. Good morning. I just want to ask a couple of clarifications. Marco, in response basically – just in terms of the announcements for the pending tenders, Italy, just to confirm, I think you said you expect a decision by the end of June. Pennsylvania, June 3. And Brazil, could you just clarify when – your answer, I didn't understand that..

Okay, I repeat it. First of all, for SuperEnalotto, we expect the decision of the regulator in the mid of June. I want to be clear. This is my expectation. It's our expectation. No one took a commitment that it has to be in June from an institutional standpoint. But we expect that this should come out in June.

Regarding the other two bids, I want to say that the submission of the bid in Brazil is due on May 23. So, Thursday this week. And regarding Pennsylvania, the submission is in June 3. The submission, and not the outcome..

Got you.

And could you possibly provide your estimate of when a decision might occur either with Pennsylvania and/or Brazil?.

Honestly, I cannot. It isn't for me to make a judgment on the Italian regulator, but I honestly – I don't know regarding Brazil and I do not have clues regarding Pennsylvania..

Okay.

Is it fair to assume you would expect something this year or could it push into next year?.

Yes. No, no, that's for sure. For sure in terms of expectations. I'm expecting that if we submit a bid on Thursday in Brazil, it will come in the following weeks. Pennsylvania, we expect the decision and the award before the end of the year. But, again, it's our expectation..

No, fair enough. And then, I guess, there are a couple of other related questions to this. Is it fair to assume – obviously, there's been a lot of discussion about return of capital, initiating a buyback of some type.

Obviously, Alberto, your comments about managing your debt levels and so forth, is it fair to assume that the probability of initiating a buyback is naturally much higher once the determination of these tenders is concluded?.

I would say no. The answer is no, in the sense that the decision regarding the capital structure will be taken at the moment in which we – again, we approach the 4.0 – we are at the 4.0 level of leverage. At that point, we will revisit how to remunerate the shareholders..

Okay. Thank you very much..

Thank you..

Thank you. And our next question comes from Domenico Ghilotti from Equita. Your line is now open..

Hello. I have a last question related to your minorities, in the sense that – well, your minority partners are generating more profit than you are on an adjusted basis in this quarter. They have been growing quite significantly. I presume that lotto is a big chunk of that.

But if you can elaborate and if you can give us a sense of what's going on and what can be a reasonable contribution on a full-year basis would be a very helpful. Thanks..

Domenico, regarding the overall lotto, the contribution to minorities is higher because the lotto is performing better. But, obviously, it's done – first of all, it's done in per share [ph] and also we are remunerated for some of the services that we provide.

So, what we mentioned in the past is that the whole minority – if I remember well, we said something in total, including the lotto, about $200 million. And now it's trending a little higher of that because the lotto is doing better and we are happy for that frankly speaking because the largest portion is ours..

Okay. Okay, thank you..

Thank you..

Thank you. And that does conclude our question-and-answer session for today's conference call. I'd now like to turn the call back over to Marco Sala for any closing remarks..

Good. Thank you, everyone, for joining us on our call today and for your questions as I hope Alberto and I were able to show we have established clear priorities for 2019. We have a good momentum minority and the determination to build on our little position in gaming. We also have new opportunities that we address with discipline.

The first quarter results provide a solid base to achieve our outlook for the year. We appreciate your interest in IGT and look forward to seeing many of you over the next few weeks. Have a good day..

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