Lottery

  • Facilities Management Contract (FMC)

    FMCs are B2B contracts that typically require the Company to design, install, and operate the lottery system and retail terminal network for an initial term, which is typically five to ten years. The FMCs are granted on an exclusive basis and usually contain extension options under the same or similar terms and conditions, generally ranging from one to five years. Under a typical FMC, the Company maintains ownership of the technology and equipment and is responsible for capital investments throughout the duration of the contract, although the investments are generally concentrated during the early years.

    Under a typical FMC, the Company provides a wide range of services to lottery customers related to the technology, equipment, and facilities such as hosting, maintenance, marketing, and other support services. The Company generally provides its lottery customers retailer terminal and communication network equipment through operating leases. In return, the Company typically receives fees based upon a percentage of the sales of all lottery tickets, including draw-based or instant ticket games, though under certain of its agreements, the Company may receive fixed fees for certain goods or services. In limited instances, the Company provides instant tickets and lottery systems and services under the same FMC. The Company’s largest FMCs include Texas, California, New York, Georgia, and Florida.

  • Operator Contract

    Operator contracts are B2C arrangements that grant the Company an exclusive license to fully manage the core lottery functions, including the lottery systems and the majority of the day-to-day activities along the lottery value chain. This includes collecting wagers, managing accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance, and supplying materials for the games.

    Since 1998, and for a term expiring in 2034, the Company has been the exclusive licensee for the Italian Lotto (management of operations commenced in 1994). Beginning in November of 2016, the Company’s exclusive license for the Italian Lotto includes purely financial partners as part of a joint venture. Lottoitalia s.r.l. (“Lottoitalia”), a joint venture company among Brightstar Lottery S.p.A., Italian Gaming Holding a.s., Arianna 2001 (an entity associated with the Federation of Italian Tobacconists), and Novomatic Italia, is the exclusive manager of the Italian Lotto game pursuant to the Italian Lotto license. Lottoitalia is 61.5% owned by Brightstar Lottery S.p.A. The Company, through Lottoitalia, manages the activities along the lottery value chain, such as creating games, determining payouts, collecting wagers through its network, paying out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance and supplying materials including play slips, tickets and receipts, and marketing and point-of-sale materials for the game.

    Since 2004, and for a term expiring in 2028, the Company also has been the exclusive licensee for the Scratch and Win (Gratta e Vinci) instant lottery through Lotterie Nazionali S.r.l., a joint venture 64.0% owned by the Parent’s subsidiary Brightstar Lottery S.p.A., with the remainder directly and indirectly owned by Scientific Games Corporation and Arianna 2001.

    The Company also has operator contracts in Anguilla, Barbados, St. Kitts, St. Maarten, and the U.S. Virgin Islands

  • Lottery Management Agreement (LMA)

    Under an LMA, the Company manages, within parameters determined by the lottery customer, the core lottery functions, including the lottery systems and the majority of the day-to-day activities along the lottery value chain. This includes collecting wagers, managing accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance, and supplying materials for the games. LMAs also include a separate FMC, pursuant to which the Company leases certain hardware and equipment, and provides access to software and support services. The Company provides lottery management services in New Jersey as part of a joint venture where the Company manages a wide range of the lottery’s day-to-day operations as well as providing marketing and sales services under a license valid through June 2029, and in Indiana through a wholly-owned subsidiary of the Parent. The Company’s revenues from LMAs include the potential to earn incentives or incur shortfalls based on achievement of or failure to achieve contractual metrics, and, with respect to the supply agreements, are based generally on a percentage of wagers.

  • Draw Games

    A lottery game where the winning numbers are drawn randomly by mechanical or electronic means.

  • Instant Ticket Games

    A lottery game offered on preprinted tickets; when certain areas of a protective coating are scratched or scraped away, it reveals symbols and words that indicate whether the player has won.

  • U.S. Multi-State Jackpot Games

    Lottery games in the United States (e.g. Powerball and Mega Millions) offered in more than one U.S. jurisdiction, allowing lotteries to generate larger jackpots than they could individually.

  • Product Sales

    Product sales revenue primarily includes the sale of lottery equipment, lottery systems and printed products. Revenue from the sale of lottery systems and equipment is recognized based upon the contractual terms of each arrangement. If revenue is not recognized over time, it is generally recognized upon transfer of physical possession of the goods or the satisfaction of customer acceptance provisions.

    Other lottery product sales are primarily derived from the production and sales of instant tickets and related services under instant ticket services contracts. Instant ticket services contracts are priced based on a percentage of ticket sales revenue or on a price per unit basis. In these arrangements, the performance obligation is generally satisfied at a point in time (i.e., upon transfer of control of the instant tickets to the customer) based on the contractual terms of each arrangement.

  • Central Operating System

    A term for the transaction engine which runs a lottery system that reconciles lottery funds between retailers and lottery authorities. Brightstar Lottery provides and operates highly secure lottery transaction processing systems that are capable of processing a significant number of transactions per minute. A variety of operating system platforms are used and Brightstar Lottery has deployed over 50 central operating systems worldwide. This also may be referred to as the host or central system.

  • Wagers

    Transactions processed through a lottery central system or platform reflecting the gross sales value of games sold for all retail and iLottery content.

  • Land-based Lottery

    Lottery products and services that are provided through operating contracts, facilities management contracts (FMCs), lottery management agreements (LMAs), and product sales contracts, not associated with iLottery products and services. Land-based lottery transactions occur through physical retail locations in each jurisdiction. Brightstar Lottery deploys more than 400,000 point-of-sale devices worldwide.

  • iLottery

    Complete suite of solutions and services including platform solutions and content offered through fully digital channels in regulated markets. iLottery platforms allow players to place wagers in an online setting across many different game types.

  • e-Instant Games

    Lottery games that are developed for iLottery platforms which may have the same or similar game themes as retail instant ticket content or have themes specific to the iLottery channel. e-Instant content can be sold to jurisdictions where Brightstar Lottery provides an iLottery platform contract or to jurisdictions where Brightstar Lottery is not the platform provider.

  • Same-Store Sales (SSS) Growth

    Growth in wagers, at constant currency, recorded in lottery jurisdictions where Brightstar Lottery is the operator or facilities management supplier, using the same lottery jurisdictions and perimeter for comparisons between periods.

  • Same-Store Revenue (SSR) Growth

    Growth in wagers, at constant currency, recorded in lottery jurisdictions where Brightstar Lottery is the operator or facilities management supplier, using the same lottery jurisdictions and perimeter for comparison between periods net of the effective rate impact of contract mix.

Financials

  • Instant Ticket & Draw Wager-based Revenue

    Revenue from wagers recorded in lottery jurisdictions where the Company is the operator or facilities management supplier, for instant ticket games and for draw games excluding U.S. multi-state jackpot games.

  • U.S. Multi-state Jackpot Wager-based Revenue

    Revenue from wagers recorded in lottery jurisdictions where the Company is the operator or facilities management supplier, for U.S. multi-state jackpot games (Powerball and Mega Millions).

  • Adjusted EPS

    Represents diluted earnings per share (a GAAP measure), excluding the effects of foreign exchange, impairments, amortization from purchase accounting, discrete tax items, and other significant non-recurring adjustments that are not reflective of on-going operational activities (e.g., gains/losses on sale of business, gains/losses on extinguishment and modifications of debt, etc.).

  • Adjusted EBITDA or AEBITDA

    Represents net income (loss) from continuing operations (a GAAP measure) before income taxes, interest expense, net, foreign exchange gain (loss), net, other non-operating expenses (e.g., gains/losses on extinguishment and modifications of debt, etc.), net, depreciation, impairment losses, amortization (service revenue, purchase accounting, and non-purchase accounting), restructuring expenses, stock-based compensation, litigation expense (income), and certain other non-recurring items. Other non-recurring items are infrequent in nature and are not reflective of ongoing operational activities.

  • Net Debt

    A non-GAAP financial measure that represents debt (a GAAP measure, calculated as long-term obligations plus short-term borrowings) minus capitalized debt issuance costs and cash and cash equivalents, including cash and cash equivalents classified as held for sale. Cash and cash equivalents, including cash and cash equivalents held for sale, are subtracted from the GAAP measure because they could be used to reduce Brightstar Lottery’s debt obligations.

  • Net Debt Leverage

    A non-GAAP financial measure that represents the ratio of Net debt as of a particular balance sheet date to Adjusted EBITDA for the last twelve months prior to such date.

  • Free Cash Flow

    A non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures.

  • Generally Accepted Accounting Principles (GAAP)

    A common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States are required to release financial statements that follow GAAP guidelines.

  • Constant Currency

    A non-GAAP financial measure that expresses current financial data using the prior year/period exchange rate (i.e., the exchange rate used in preparing the financial statements for the prior year).

  • Service Revenue Amortization

    We periodically make long-term investments in contracts with customers and obtains licenses to supply products and services to the customers. As consideration, we pay license fees, which are classified as “Other non-current assets” in the consolidated balance sheets. We recognize the amortization of the license fees as a reduction of service revenue over the estimated economic life of the license term.

  • Non-controlling Interests

    These primarily consist of the minority partners in our two large Italy lottery contacts. Brightstar Lottery’s economic interest through joint venture in the current consortium for the Italian Gioco del Lotto contract is 61.5% and for the Italian Scratch and Win Games (Gratta e Vinci) contract is 64.0%. They are remunerated with dividends and return of capital to non-controlling interests found in the financing activities section of the Company’s consolidated statements of cash flows.