Hello, and welcome to the International Game Technology PLC Q4 2023 and Fiscal Year 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, simply press star one. I will now turn the call over to James Hurley, Senior Vice President, Investor Relations. Please go ahead.
Thank you, Sarah, and thank you all for joining us on IGT's Q4 and Full Year 2023 Conference Call, which is hosted by Vince Sadusky, 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, 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.
Thank you, Jim, and hello to everyone joining us today. We delivered a strong finish to 2023, with Q4 operating income growing 11%, yielding 160 basis points of operating margin expansion and strong free cash flow generation. This enabled us to meet our fiscal year 2023 financial goals, which were raised 2x during the year. In fact, the growth across our Global Lottery, Global Gaming, and Play Digital segments contributed to record-breaking achievements of $1 billion in operating income, $1.8 billion of EBITDA, and a 41.3% EBITDA margin. This translated into significant cash generation in the period, including record cash from operations of over $1 billion, bringing the company's net debt leverage to the lowest level ever.
It's an impressive set of accomplishments that confirms we are on track with our long-term strategic and financial goals across the portfolio. I'd like to acknowledge the hard work of the entire IGT team in delivering them. We have a culture grounded in responsibility, collaboration, and passion. These values are not only the key drivers of our success, but also make IGT a great place to work. So thank you to all my IGT colleagues around the world. In fact, IGT was recently recognized as a top employer in the U.S., Italy, and Canada by the Top Employers Institute, which is the global certification company recognizing excellence in the conditions employers create for their people. I'd like to spend some time on the operating performance of each segment, beginning with Global Lottery. We maintained our leadership position in 2023 through a combination of organic growth, portfolio expansion, and contract extensions.
That's clear in the 7% revenue growth achieved in Q4, as well as the 6% growth for the full year period, net of the Italy commercial services sale. These are impressive numbers for a business of this scale. Same-store sales rose a little more than 2% in the year, consistent with the steady low to mid-single-digit growth for the lottery industry. Italy's same-store sales increase of nearly 7% is especially noteworthy. The lotto and scratch-and-win games we operate in Italy are among the largest and most successful in the world. Italy's strong momentum during 2023 reflects IGT's expertise in understanding player behavior, developing compelling new games, managing a broad distribution network, and officially conducting day-to-day operations. The low single-digit same-store sales increase in North America and the rest of the world was achieved on top of accelerated growth in the last few years.
iLottery sales continued to expand at a fast clip, up over 40% in 2023, mostly driven by organic growth in existing markets. During the year, we bolstered our contract portfolio with multi-year extensions in some of our largest jurisdictions, such as California, in addition to other key markets like Kentucky and Virginia. We also added some new business to the mix. We went live with a new facilities management contract in Connecticut and launched instant and passive games in Brazil, state of Minas Gerais, an important foothold in a market with significant potential. We were also awarded an iLottery platform contract in Connecticut, where we expect to go live with draw-based games later this year. Lottery profitability improved in 2023, with operating margin expanding 100 basis points to 36%. Lottery is a large, steady, growing and resilient industry with recession-proof characteristics.
Growth accelerated during the pandemic, and our 2023 results confirm that we are successfully maintaining these higher play levels with significantly improved margins. Operating margins are up 600 basis points from their pre-pandemic level. We expect the industry to expand at more customary low to mid-single-digit rate off this higher sales base, fueled by organic growth and growing our lottery adoption, especially in the U.S. There are some new opportunities in the horizon, such as Brazil, where many states are looking to launch lottery games. Now on to Gaming. The focused execution of key product and operational strategies is fueling strong growth for our Global Gaming segment. This is especially evident in profit performance, with Q4 operating income up 17% and full-year operating income up approximately 30%. 9% revenue growth for the year reflects broad-based strengths across several key performance indicators.
We shipped over 35,000 gaming machines in 2023, up 7% from the prior year, and achieved record average selling prices. Unit growth was fueled by a double-digit increase in casino units, led by replacement demand. We continued to release high-performing new games, such as Magic Treasures, which has two titles ranking in the top 10. We also have three of the top 10 new mechanical reel games. The PeakCurve 49, Diamond RS, and PeakSlant32 continue to rank among the top North American cabinets in their categories. Our global installed base grew 9% to nearly 54,000 units, reflecting strong premium unit expansion in the US and Canada, and considerable growth in Latin America. We've delivered six consecutive quarters of installed base growth in the US and Canada, led by premium units, and nine consecutive quarters in the rest of the world.
Premium growth is fueled by the continued success of Prosperity Link and is accelerated with launch of Mystery of the Lamp, which was recently named top-performing new premium game at the EKG Slot Awards Show. We have an exciting pipeline of new for-sale and lease games planned for 2024, including the launch of the much-anticipated Whitney Houston Slots on IGT's new SkyRise cabinet this spring. It was another record year for both revenue and profit at our Play Digital segment. 9% revenue growth was fueled by a double-digit increase in iCasino GGR across geographies. Operating profit rose over 30%, yielding 500 basis points of margin expansion, highlighting the powerful leverage inherent in this business. Strong iCasino GGR growth is a direct result of new games and creative solutions designed to deliver a rich player experience.
Innovation is a vital growth driver in the absence of current new market regulation, especially in the U.S. Our top-performing games leverage IGT's unique capabilities. Wheel of Fortune: Triple Gold Spin is the first and only omni-channel jackpot game in the U.S., inspired by our highly successful Powerbucks franchise in Canada. These games are effective player acquisition tools. They engage players across platforms for large-scale wins with combined jackpot liquidity between land-based, mobile, and online formats. In addition, our customers have had success with bespoke games that tailor IGT's leading IP for a specific customer. Examples include Cleopatra Fort Knox and Blackjack Go for FanDuel Casino and Caesars Cleopatra for Caesars Palace Online Casino. We've also begun deploying our unique suite of user engagement and analytics tools. These are designed to provide real-time player insights for our customers and drive player productivity.
We've seen great results with early adopters, and we look forward to rolling these out more broadly. In sports betting, we entered 4 new jurisdictions in 2023 and had 26 new installations, including 20 new casino retail locations, 3 on-premise mobile launches, and 3 statewide mobile launches. We also introduced sports betting functionality with the capability to live stream sports on our Peak Bar Top and CrystalFlex terminals. Play Digital growth is dependent on new iGaming legislation, which has been slower than expected. This appears to be the case in 2024 as well. In that context, we'll be focused on driving cost efficiencies to stay on track with our margin expectations for the business. We're pleased to have achieved record-breaking profits for the year. The IG team executed with excellence. You see this in the momentum we had across segments.
Our 2024 outlook, which Max will walk through later, primarily reflects organic growth for the existing businesses. Recently, we announced the transaction to spin off our Global Gaming and Play Digital businesses and merge them with Everi's existing operations. The decision was the result of a strategic evaluation with the goal of unlocking the value of our portfolio. IGT shareholders will retain 100% ownership of the predictable growth and resilience of a global lottery pure-play, while owning 54% of a faster-growing Gaming, Digital, and FinTech business. We believe the creation of two stronger, more focused companies, each with top-notch teams and simplified business models, better positions each company to service its customers and create significant value for stockholders.
It allows for more focused operating and capital allocation strategies, capital structures that are optimized for different business models, and increased flexibility to pursue organic and inorganic growth strategies. It also provides the opportunity for investors to better appreciate the intrinsic value of each standalone business. For context, lottery peers trade between 12x-18x EV to EBITDA, compared to IGT at just 6x, and none match IGT's scope of capabilities. The new gaming business will have a similar scale and growth trajectory as its peers, and that's before the benefit of potential revenue synergies. These gaming peers trade between 11x-13x EV to EBITDA. IGT has a broad global product offering across Class III VLTs, iGaming, and casino management systems. Everi's business is focused on North America, primarily with Class II games and extensive FinTech capabilities.
The combination of the two companies with complementary capabilities and geographic footprints creates an integrated, omni-channel, one-stop shop, addressing all aspects of the gaming ecosystem that we believe will provide a superior value proposition of best-in-class and efficient solutions. Together, we can generate touch points across the entire player journey, from the casino floor to mobile. The business has an attractive recurring revenue model with recurring revenue streams from gaming operations, iGaming, and FinTech solutions, representing over 60% of pro forma revenue. We expect revenue to grow at a mid-single digit compound annual growth rate through 2026, with adjusted EBITDA increasing at an even stronger high single digit rate. That's through a mix of organic top-line growth for the existing businesses, enhanced by significant cost synergies, mostly from straightforward supply chain and real estate optimization initiatives.
These synergies on their own are worth over $500 million in value for the combined business. Given the minimal business overlap between the two companies, there are some compelling revenue synergies across product and geographies that are not yet factored into our outlook. We expect to manage the business with a strong balance sheet and conservative leverage profile. An improved conversion of adjusted EBITDA to cash flow should allow for investments in both organic growth and M&A, significant debt repayment, and share buybacks. The company will be made up of a best-in-class team across both organizations, with long-standing industry knowledge, relationships, and a proven track record in B2B gaming and FinTech. The executive team has over 20 years average experience across M&A integration. Needless to say, we're very excited about the opportunity for long-term value creation for the standalone Lottery and Gaming business.
Now I'll turn the call over to Max.
Thank you, Vince, and hello to everyone joining us on the call today. Our fourth quarter and full year 2023 financial performance was strong, achieving the upgraded outlook provided on our Q3 earnings call on all key financial metrics. We delivered record profit on a full year basis, despite the comparison to prior periods affected by significant divestitures like Italy Gaming in 2021 and Commercial Services in 2022. These results confirm that most of our long-term targets have already been achieved or are confidently in sight, with a clear trajectory to get there. A high-level summary of our financial results is included here on slide 13, including comparisons to the prior year.
In the fourth quarter, we generated revenue of over $1.1 billion, up 3% year-over-year, driven by a 7% increase in Global Lottery on strong product sales and continued momentum in Italy. Operating income rose 11% to $256 million, and operating income margin increased 160 basis points to 23%, reflecting stronger performance across business segments. Adjusted EBITDA of $454 million increased 9% over the prior year period, and adjusted EBITDA margin expanded 190 basis points to 40%. Adjusted EPS rose 40% to $0.56 per share, driven by the strong increase in operating income. For the full year, we generated revenue of $4.3 billion, up 2% or 7% net of the Italy Commercial Service sale on mid- to high single-digit growth across business segments.
Strong Italy same-store sales in Global Lottery, easing of supply chain costs and R&D process improvements in Global Gaming, and strong operating leverage in Play Digital drove operating income up 9% to $1 billion, which is a record profit in our company history. Operating income margin rose 140 basis points to 23%. Full-year adjusted EBITDA of $1.8 billion and adjusted EBITDA margin of 41% also achieved the highest level in company history. Reported EPS was $0.77, and adjusted EPS was over $2 per share, a 2% increase year-over-year, driven by higher operating income, partially offset by some tax headwinds. Now, let's review the results of our three business segments.
Global Lottery delivered $681 million in revenue in the fourth quarter, an increase of 7%, driven by strong product sales and Italy same-store sales growth. Global same-store sales declined 3%, reflecting the impact of strong US multi-state jackpot sales in the prior year that were bolstered by the record $2 billion Powerball jackpot that hit on November 7, 2022. Same-store sales in Italy rose 3%, with growth in both instant ticket and draw games. Customer demand for IGT's innovative hardware drove fourth quarter product sales revenue up 94% year-over-year, propelled by large GameTouch 28 self-service terminal sales in Michigan and Ontario, and the sale of a central iLottery system in Poland. Operating income rose 10% to $238 million in the fourth quarter.
Operating income margin expanded 110 basis points to 35% on continued strong momentum in Italy and increased high-margin product sales and despite lower benefits from jackpot activity. For the full year, revenue of $2.5 billion was 2% lower year-over-year, but increased 6%, excluding the Italy Commercial Services business sales. Operating income of $913 million was in line with the prior year, despite a $34 million contribution from Italy Commercial Services last year. Operating income margin increased 100 basis points to 36%. Global Gaming revenue of $390 million in the fourth quarter was slightly above the prior year, despite unusually high jackpot expense associated with a higher-than-normal frequency of jackpots won on the Nevada Megabucks wide area progressive game.
Increased terminal product sales revenue and higher IP fees were offset by lower system sales. We shipped nearly 9,400 units in the fourth quarter, driven by continued strength in casino replacement units, which grew 6% year-over-year. Global ASP were $15,900, with North American ASP increasing 4% to $16,300, confirming the expected positive trajectory following a blip in the third quarter due to mix. The global install base expanded to over 53,900 units, with significant increases across geographies.
Momentum in the business accelerated in the fourth quarter as the US and Canada install base grew 1% sequentially and 6% year-over-year on continuous success in multi-level progressive games, while the install base in rest of world rose 4% sequentially and 14% year-over-year, reflecting growing demand for high-performing games in Latin America and parts of Europe. Fourth quarter operating income rose 17% to $80 million, and operating income margin expanded 290 basis points to 21%, as easing of supply chain costs and R&D process improvements were partially offset by the higher jackpot expense dynamics I explained earlier. On a full year basis, revenue of $1.6 billion increased 9% on broad-based strength across key performance indicators.
Operating income rose 29% to $313 million, and operating income margin expanded 320 basis points to 20%. Play Digital generated $59 million in revenue in the fourth quarter, down 10% from $65 million in the prior year, due to a benefit related to jackpot expense in the prior year and lower sports betting volume and unfavorable hold rates in Rhode Island. iGaming GGR trends remained strong, with increases across geographies, including double-digit growth in the U.S. and sports betting GGR in line with the prior year. Operating income increased to $17 million, and operating margin rose 360 basis points to 29%, primarily driven by disciplined cost management and reduced variable compensation cost. Continuing to proactively manage the cost structure is a priority in 2024, given the expected slower progression on new legislation expected in the next year.
Record revenue and operating income levels were achieved in the full year period. Revenue increased 9% to $228 million on iGaming growth across geographies. Strong operating leverage drove operating income up 32% to $65 million, with our margin expanding 490 basis points to 29%. Record level operational performance and a 58% cash conversion rate drove cash from operations to over $1 billion, the highest level in company history. With capital expenditures and deferred license fees of about $420 million, free cash flow of around $620 million exceeded our expectations. Adjusted free cash flow was over $800 million. We've been executing on our balanced approach to capital allocation over the last two years, generally tracking very much in line with what we presented at our Investor Day in November of 2021.
We returned $160 million to shareholders in 2023 in the form of cash dividends, and we have $145 million outstanding under the current share repurchase authorization after having used about half of the $300 million program. Total liquidity remains robust at $1.8 billion at year-end, which includes $1.2 billion in additional borrowing capacity from undrawn credit facilities. In the last three years, we have progressively strengthened our credit profile with significant debt reduction of over $2.2 billion and net debt leverage improving 3.5x turns to a record low 2.9 x. This leaves us well within our target leverage range of 2.5x-3.5 x, and in a nice position with no meaningful near-term debt maturities.
This improved credit profile was also reflected in credit rating actions taken early in the year by rating agencies, with Moody's upgrading our rating to Ba1 from Ba2 with a stable outlook, and Fitch assigning an issuer rating of BB+ with a stable outlook, and an investment-grade senior debt rating of BBB-. In addition, last week, following the announcement of the planned spin and merger transaction, both S&P and Fitch placed IGT on a positive credit watch. Let me now introduce our 2024 outlook. In an effort to provide a simpler view on underlying business expectations for the year, we are assuming the transaction closes in early 2025. This eliminates the need for complex accounting adjustments to the outlook if we were to achieve a 2024 closing. We believe this approach also helps you assess our progress toward the long-term targets provided at our last Investor Day.
For the full year, we currently expect to generate revenue of $4.3 billion to $4.4 billion, implying year-over-year growth of between 0% and 2%. Operating income margin is expected to be between 20%-21%, which includes a 300 basis point negative impact from $130 million in pre-closing separation and divestiture costs related to the planned spin and merger transaction. Those costs are expected to be incurred ratably due throughout the year. Excluding the separation and divestiture costs, a view that we believe offers a better assessment of underlying business performance, our outlook calls for an operating margin between 23%-24%, up to 100 basis points higher than in 2023.
Operationally, this outlook assumes Global Lottery same-store sales will be flat to slightly lower year-over-year due to the strong jackpot activity experienced in 2023. While large jackpots do tend to happen from time to time, the timing is unpredictable and therefore we don't plan for them in our forecast. If you exclude the impact of jackpots, same-store sales are expected to increase low single digits across jurisdictions on the back of consolidating much higher play levels. In order to facilitate a clear understanding of the split between remaining activities and the businesses that will merge with Everi, we have decided to aggregate Global Gaming and Play Digital into a single segment named Gaming and Digital, starting with our Q1 2024 results. The new segment is a simple aggregation of the numbers of the two previously reported segments, with no change to our central cost allocation policy.
We will continue to provide the same level of KPI and revenue disaggregation as in the past, so we expect minimal impact from the modification. Speaking about that, we expect Gaming and Digital revenue to increase at high single-digit rate. This comes from continued growth in the install base, unit shipments and ASPs for Gaming, and growth in existing markets for digital as the pace of new legislation has slowed. Operating income margin is forecasted to improve 250-400 basis points on the back of the favorable KPI trends, continued improvement in supply chain and focus on cost discipline, moving us one notch closer to our long-term target of 28%-30%. Turning to our cash flow, we expect cash from operations of at least $1 billion, which also includes the impact of separation and divestiture cost.
Capital expenditures of approximately $500 million includes about a $75 million increase from 2023 related to recent contract wins and multi-year contract extensions in our Global Lottery business. For the first quarter, we expect to deliver revenue of approximately $1 billion and operating income margin of around 20%, which also includes the 300 basis point impact from pre-closing, separation, and divestiture costs I just mentioned. Global Lottery same-store sales are expected to be down year-over-year, as same-store sales growth in Italy is offset by tough North American jackpot comps. Gaming and Digital revenue is likely to be lower than the prior year on a return to more normal seasonality in unit shipments against pent-up demand in the prior year period. In addition to elevated IP and software licenses last year.
We are very excited about the significant value creation potential of separating IGT into two standalone pure play companies. The combination of IGT Global Gaming and Play Digital with Everi existing operations creates a podium position player with the scale, diversification, cash flow generation, and growth outlook that is on par with other gaming peers that trade at significantly higher valuation multiples. I would now like to spend a few minutes reviewing some of the key financial aspects of the planned spin and merger transaction, as well as the remaining steps that will need to be completed to close the transaction. Upon closing, the newly created combined gaming entity will raise financing of $3.7 billion, which will be used to fund a $2.6 billion distribution to IGT PLC and refinance Everi existing debt.
IGT PLC plans to use the proceeds from this distribution to repay $2 billion of existing indebtedness and fund about $400 million in transaction-related cash outflows. This debt reduction is expected to drive RemainCo PLC pro forma net debt leverage down to around 2.5 x shortly following the closing of the transaction, putting us in an even stronger balance sheet position. I'd like to address the taxable nature of the transaction since it has been an area of focus for some of you. Most RMT transactions in the U.S. are done as tax-free distributions, followed by tax-free merger. Since IGT PLC has the benefit of a participation exemption regime, tax leakage from the transaction is expected to be modest, up to $100 million or less than $0.50 per IGT share.
The other important benefit of a taxable transaction is that it provides maximum flexibility on strategic initiatives like M&A and share buybacks for both entities from day one. The transaction is also taxable to IGT shareholders. We have provided additional disclosure on this matter in our 20-F to be filed with the SEC at the end of the day. Achieving a closing in late 2024 or early 2025 is predicated upon the successful completion of regulatory and licensing approvals, as well as approvals from IGT PLC shareholders on the spin of the Global Gaming and Play Digital segments and Everi shareholder approval on the merger transaction. To summarize, we deliver strong financial performance in 2023, with results that met upgraded financial targets. We generated significant cash flows and improved net debt and net debt leverage to the lowest level in company history.
We're heading into 2024 on a solid foundation with clear prospects for profitable growth, significant liquidity, and no material near-term debt maturities. We have laid out the milestones to deliver the spin and merger transaction with Everi as expeditiously as possible, and we are excited about the prospect for two standalone global pure play companies to create significant value for share-- for stakeholders. That concludes our prepared remarks. Operator, will you please open the line for questions?
Thank you. If you have a question, please press star one on your telephone keypad. If you have queued up and want to withdraw your question, simply press star one again. Your first question comes from the line of Barry Jonas with Truist Securities. Your line is open.
Hey, guys. Good morning. Wanted to start with Gaming. Can you give a little more details on the path and key components to hitting that 25%, 20%-30% OI target? Then help us understand how much of that could be transferable to Everi's business for the new co. What's embedded in the synergies and maybe what's upside? Thanks.
Sure. Hi, Barry. This is Max. So again, we closed the year at 20%. We expect a margin accretion in 2024 of between 250 and 400, right? And which is effectively at the upper end, mid of the way to the minimum of the 2025 targets. So with a year to go, we have another similar trajectory to achieve. So ratably, we are in a logical sequential to get there.
The tailwinds to get there are primarily related to the positive momentum we have gained in our install base, which reflects successful launches of games such as Prosperity Link, Mystery of the Lamp, and more new games coming, especially in 2024, with the Whitney Houston on the SkyRise cabinet. That is the first item that impacts the positive margin trajectory. The second item is finally expectations on an expansion on international sales to walk in tandem with the successful expansion of the install base so far achieved.
I remind you of the 14% increase in the install base in 2023 for international markets, which we expect to continue, again, based on the solid foot of the successful games. And then lastly, we continue to expect a positive momentum on a supply chain easing of cost, which will be a positive contributor to the margin accretion in 2024.
Got it. Got it. Okay, and then just as a follow-up, wanted to touch on the Italy lotto renewal process. Any updates there on timing? And maybe just talk about how you see your positioning there as the incumbent. Thanks.
Yeah, sure. Recently, there was a news in Italy that a draft online gaming decree was introduced by the finance committee, and that outlined some of the terms of the tender for the upcoming lotto license. What we know coming out of that was there would be a start to the tender process. The terms would be a non-renewable 9-year concession and a minimum upfront license fee of EUR 1 billion, which could be divided into multiple installments. Part would be paid upon winning the tender and part with the start of the new concession.
So considering the news that's come out, we'd say the regulator has set a high bar for interested parties willing to commit to such a significant amount of capital, which we believe, similar to the past, likely limits the field of qualified candidates. And then, of course, potential bidders will need to demonstrate, you know, their strategy and prove their execution capabilities, in order both to, I think, convince the Italian authorities that they can execute, and then also, internally, to be ensured that they can achieve an appropriate ROI on such a significant commitment. You know, for us, you know, we, of course, have operated the lottery for three decades, and, you know, we're excited about the potential to continue to do so.
You know, as far as the process goes, you know, it's a lengthy process. You know, the government has to codify and finalize the economics, then they have to draft the tender, and they have a legislative process that needs to take place as well, which we've seen in the past is quite lengthy. Once, of course, all that is done, once the formal tender is issued, then there's some time for interested parties to make their assessments, offer up a bid. Then, of course, there's the assessment of all the offers, and ultimately make an award. So, you know, we think the timeframe for all this is probably a year to a year and a half in our best estimate.
Perfect. Appreciate the call, and congrats on a nice quarter and year.
Thank you.
Your next question comes from the line of Chad Beynon with Macquarie. Your line is open.
Morning. Thanks for taking my question. Nice quarter. Vince, Max, wanted to ask about the kind of the January softness that we've heard from a lot of your operating partners that affected business in January. Was that also the case in Lottery? And then more importantly, you know, after we got past some of that inclement weather, those weekends, have we seen more consistent, stable trends in both your businesses, Gaming and Lottery? Thanks.
Yeah, I'll start off with Lottery and then touch base on Gaming. W hat we saw in 2023 into 2024, 'cause, of course, reminding everybody of the components of the 2023 growth puts 2024 in perspective. You know, we saw over 2% same-store sales growth in 2023 and a very good year in product sales. We saw an increase in instant and draw games and a very significant increase in jackpot activity, somewhere just under 6% or so, driven by Powerball and Mega Millions, of course. So as strong as the jackpots were in 2022, they ended up being even stronger in 2023.
In 2023, in the fourth quarter, you know, we saw instant and draw were down slightly, about 1% from the prior year. B ut again, made up for by pretty strong multi-state jackpots. And, you know, if you think about this over multiple years, there's been a pretty significant increase from going back to pre-pandemic. You know, I'd say the growth has actually been really remarkable. And to continue to have that play level at these elevated levels is, you know, was our thesis, and that's held up really well. Looking at the first quarter trends of course, you have to take Italy and North America separate.
In Italy, we continue to have very strong growth, up mid-single digits. We expect that a lot of that was due to continued innovation and product launches. The team's done, you know, an outstanding job over the last several years, in particular, in stimulating demand and making the games constantly fresh and enjoyable. We think as those new launches moderate throughout the course of the quarter, we'll probably end up somewhere in low single digit growth in the first quarter in Italy. In North America and the rest of t world, sales are down high single, low double digits, and of course, you know, so much of that has to do with the timing of multi-state jackpots, in particular, Powerball and Mega in North America.
w e think that will moderate, the negative impact of that will moderate, just again, given the timing of the growth of those jackpots that were hit in the first quarter last year. And so we think we'll probably, on a same-store basis, be down low to single digits in North America and the rest of the world. And as Max provided, you know, we believe that we'll be in kind of the low to mid-single digit long-term growth outlook. We think we can maintain that as a result of innovation, as well as, you know, kind of the expansion of our game portfolios.
I won't go in through a bunch of detail on that, but a bunch of the activities and efforts that you've seen IGT perform in over the last several years in particular. On the gaming machine side, you know, we're in really great shape in terms of our product portfolio. You know, I'll take a minute just to kind of remind everybody of that. You know, we have five games that rank amongst the top 20 new WAP games in the most recent February Eilers report. You know, we've got several of our Mystery of the Lamp games are in the top 15 new premium lease games. Our Magic Treasures franchise, new franchise, rank in the top 10 new core video games.
Our stepper, we have 13 of the top 25 games. And our fairly recent hardware launches over the last year or so have ranked number one or number two in their categories. To speak specifically about the industry, Chad, 2023, of course, was another record year for the gaming industry, coming off of an incredible 2022. The estimate in the industry was slot GGR was up, you know, somewhere around 2%. And when you think about the start of the year, the concern around recessionary pressures and concern around disposable income for consumers, you know, none of that really played out, at least in terms of people's affinity for entertainment and in particular casino play.
In fact, in the fourth quarter, slot GGR held right in there with the annual estimate, up around 2% or so. You know, there was a really strong December, for sure. We start off the year, you know, as you've heard our casino customers discuss and the research that's been published, the January trends are softer. Question how much of that is potentially weather? Not really sure, of course. Overall, as you've heard our casino customers report, the customer sentiment remains really good. You know, of course, slot play is the most profitable item for our casino customers.
w e're seeing kind of a more normalized sales funnel, which is kind of returning to historical levels. You know, we certainly went into 2022 with a lot of pent-up demand as a result of not being able to deliver product because of our supply chain lead times. So I would say things are more normalized right now. When you look at markets outside of the US for Gaming, EMEA, LATAM, and Australia, EMEA is behind pre-pandemic levels. We've seen kind of a very clear line between Western and Eastern Europe. Western Europe is pretty much back, and we, you know, we compete very well in that market.
Eastern Europe, you know, has been hurt by kind of the sociopolitical situations taking place there, and some other specific challenges, like a Romanian tax and regulatory challenges. In Latin America, the recovery has been really strong, and, in particular, IGT games play well there. You've seen pretty significant increase in install base. At the moment, though, there are some macro-related weaknesses in places like Argentina and the new import restrictions imposed by the Mexican government that impacts all suppliers, and, you know, we hope that gets resolved throughout the course of the year. And then, you know, in Australia and New Zealand, the macro environment continues to be challenging, but it's growing.
W e've not competed as well in that market, but we've got a slate of new games that the team is confident can very much increase our share, and we've done well with systems in that market. So overall, you know, I'd say the start of the year is definitely slower than last year. We think it's for you know very specific reasons. Again, in Gaming, a lot of pent-up demand from kind of that unnatural supply chain restrictions, and then in Lottery, very specific to the timing of very strong jackpots going into last year versus the start of 2024.
That's great. Thank you. And then on the CapEx, just a housekeeping follow-up to the $500 million of guidance for 2024. Can you help us think about what should go to Gaming and Digital versus Lottery? And then can you also just kind of help us with a maintenance CapEx number for Lottery ex new contracts going forward, post-spin-off? Thank you.
Hi, Chad. So, in terms of the CapEx number, we effectively have increased our investment into our installed base in Gaming in the last two and a half years, and so the CapEx figure of Gaming has increased above $200 million. We expect that to slightly moderate next year. Instead, on the Lottery side, we have been on a favorable cycle in the last couple of years, and now we're starting to see that CapEx number picking up again as we are going to face some significant contract renewals in the next two to three years. But for next year, there is an expectation of an increase of about $75 million coming from Lottery, which is primarily related to the three contracts that we mentioned during the call.
So California, long extension, plus Kentucky and Virginia. These are the early CapEx investments that we expect to spend on those contracts in 2024. And so in terms of long term, in terms of maintenance versus growth or new contracts, again, this business has been running historically, I'm talking about the Lottery business, historically at a clip of about $200 million in CapEx per year, if you were to exclude the cycles. And again, so anything above that number, kind of, if you want, is really related to the upcycle in CapEx associated with large contract renewals, extensions, or wins that we will have going forward. Thank you.
Appreciate it. Thank you, Max. Thanks, both.
Once again, ladies and gentlemen, if you have a question, it is star one. Your next question comes from the line of Jeff Stantial with Stifel. Your line is open.
Hey, good morning, everyone. Thanks for taking our questions. Vince or Max, whoever wants to take this. You talked about the full year guide, assuming low single-digit growth for Global Gaming Lottery sales, if you strip out the impact of multi-state jackpots. You know, this seems to reflect a reversion back to, we'll say, more stabilized core trends after several quarters of jackpot fatigue. I guess, what specifically in the data are you seeing that gives you conviction and is improving underlying demand? Thanks.
The week-to-week trends have been improving. And as we look in our more significant markets, you know, we have confidence given the slate of game launches that they've got coming up. And I think given our past history, we've seen that play level, again, kind of post-pandemic, has been maintained and has grown some as well. W e certainly don't have perfect visibility given Lottery is largely an impulse purchase. But we do believe that given the slate of games as well as, you know, the multi-state jackpot ability to build, again, unpredictable.
But with the continued high interest rate environment, you know, the calculation of the advertised multi-state jackpot gives states the ability to continue to advertise a number that's exciting to players. And we think that will help to get the infrequent players to continue to think about playing lottery.
Great. That's helpful. Thanks for that, Vince.
Sorry, Jeff. From a more technical standpoint here. So again, as Vince said, we have seen steady increase in jackpot games for the last 18-24 months, and this has been likely attributable to the advertised jackpot that exceeds the $1 billion, and we can mention 6 in the last 18 months at least. So advertised jackpot levels are helped by the rising interest rate environment, as they are based on a 30-year annuity stream. So that means that it doesn't take the same level of underlying sales today to advertise a $1 billion jackpot as it did a few years ago before the interest crept up. So keep in mind, although all of that, keep in mind that IGT is remunerated as a percentage of lottery ticket sales, not the advertised jackpot size.
So net net, we generate high revenue when there are large jackpots. We remain comfortable with this low single-digit long-term growth outlook for the Lottery business when you exclude the impact of the jackpots. Lastly, on a full- year 2023 basis versus 2022, the impact of jackpot in the financials was about $15 million for the full year. Thank you.
Great. That's helpful, color. Thanks, Max. And then for my follow-up, turning to the Gaming business, and you talked about normalizing slot seasonality embedded in the Q1 guidance. You know, we're almost at the end of the quarter, so I would assume that's informed by pretty accurate existing data here. I guess, more specifically, what gives you comfort that the pullback you're seeing is more related to seasonality as opposed to kind of pullback in kind of underlying purchasing behavior related more to the macro or sequential market share, you know, go to competitors? Just I guess, what kind of informs your view that this is this is mostly seasonality-driven? Thanks.
Yeah, sure. So, you know, a couple of data points. One is, when you look at the estimate of the industry in North America for 2023, you know, the install base went up a couple of percentage points and, you know, unit sales was up probably somewhere in the 10% range. And, you know, compared to that, IGT grew share. In 2024, the industry is calling for a slowdown in unit sales, and probably about the same, you know, similar increase in install base. So, you know, given the strength of our product, you know, we feel we can continue to compete and grow some share in North America.
But, you know, not at the same rate as we have done over the last several years as we've, you know, significantly increased. We think, you know, the growth for IGT, a lot of the growth is going to come internationally, where we've had very good momentum in Latin America, good momentum in Europe and less so in Asia Pac. And when we look at the, you know, kind of the exciting pipeline of games that have performed very well in North America, you know, the ability to penetrate and continue to penetrate international markets is an opportunity that we believe is achievable and important for us.
Great. That's, that's really helpful. Thanks, and thanks, Max. I'll, pass it on.
Your next question comes from the line of Domenico Ghilotti with Equita. Your line is open.
Good morning. I have a question on the profitability on the Lottery business. First of all, just to be sure that I got the answer on the jackpot contribution as 15, so 15 on EBITDA for 2023. And second, so in an environment that is maybe a bit less supportive, and with a business that is very high, it's a fixed cost, should we expect, say, you have some room for keeping the profitability, say, above the level or at least the level that we have seen in Q4? Or should we expect some negative impact on profitability for the Lottery business?
Hi, Domenico. Yes, the number you repeated is right, 15 , 15 for the full year 2023 versus 2022. In terms of the margin expectations, we expect we are at the high end of the margin target we quoted in our Investor Day for Lottery. So again, holding that margin would be definitely a very good thing to do. And in order to do that, obviously, we have to work very hard to continue to earn the rights to gain to award to gain new contracts and to remain efficient in the execution of the existing pipeline.
So again, finally, vis-à-vis the fourth quarter margin, there was a significant benefit, a one-time benefit, if you want, on product sales, which were up almost 100% year-over-year, because of the specific deliveries that we executed. On a full- year basis, we are slightly ahead in terms of product sales in Lottery year-over-year, so it was really more of a quarterly impact. But again, long-term, we expect to be able to hold the line on the margin within the range that we quoted ourself for.
Thank you. Thank you.
Your next question comes from the line of David Katz with Jefferies. Your line is open.
Hi, good morning, everyone. Thanks for taking my questions. You know, Vince, I wanted to just, you know, talk about the time period that we have, you know, between now and closing. And just get a sense for strategically, you know, how you're thinking about the two gaming businesses, they're continuing to push their momentum forward, you know, product-wise, keeping people, you know, in place, right? You know, because that closing process can take a while. And, you know, how do you think about the two gaming businesses together and some specifics around, you know, where their sort of standout strengths could be, and where the combination of their capabilities or assets could help you lead, you know, once the combination is done?
Yeah. Hey, David, thanks for the question. So, a couple of things. One is, both companies have retention plans in place for their top talent. And I will say, given the momentum in particular that IGT's had over the last couple of years, even prior to announcing this transaction, we've been able to recruit. We don't really, you know, talk about this or highlight this, but we've been able to recruit some top game developers that are responsible for many games on Eilers' top game list. So, we believe now that there's been resolution, and I think excitement and anticipation to be associated with, you know, what's essentially going to be a new combined entity.
We feel very strongly in our ability to recruit top talent in the industry, much less keep our talent. We've had really good conversations with our teams. We had the benefit of having our IGT commercial team together just a few weeks ago. Last week, Everi happened to have their commercial team together. You know, we've discussed a lot of the messages and feedback that we've received from our customers at the highest level of the organizations, which really reacted with genuine excitement about the merger. They really enjoy the commitment and the knowledge that both companies have, and the fact that they are complementary in nature with very little overlap. So I think that was really exciting.
We have talked to our teams about the, you know, the combined portfolio being, you know, a real standout. It'll absolutely differentiate us from our peers and our competitors. As we've said, we don't believe anyone would have such a comprehensive range of products and solutions. And we're going to have a really impressive global studio and creative footprint, which is really the key to continuing to generate top-performing games. You know, Everi's got expertise in several areas that IGT doesn't, in particular, FinTech, and we've got good international experience, and we think, you know, these things in combination will absolutely be complementary.
You know, when we think about what we have to offer on a go-forward basis, both for our employees, recruiting new folks to the organization and for our customers, you know, as we've said in the past, you know, this is really an opportunity to create a podium position player with, you know, with great scale, great product diversification, great cash flow, all on par with our competition. You know, we're looking at, I think, you know, we've mentioned in the past, just on a pro forma basis, revenue of $2.6 billion, EBITDA more than $1 billion, roughly 60% of that recurring, and an install base of somewhere around 70,000 units.
So we think, you know, that excitement around being a one-stop shop for land-based gaming and really being able to provide the complete player journey from, you know, iCasino to sports betting to FinTech is something that is very good value proposition to our customers and one that, folks associated with the new company, you know, are very, are very excited about.
Perfect. Just one quick follow-up. With respect to FinTech and systems, putting those together, it strikes as, you know, something that, that's a much longer-term, you know, opportunity. Are there, you know, shorter-term singles and doubles and ways that you can leverage each other, you know, more immediately post-closing? It's just a discussion we've had with a lot of investors past, you know, past week since we learned about this.
Yeah, I would say, you know, overall, again, the longer-term play is, as you point out, to be the leading tech and content company in the B2B space. You know, we've got a lot of work to do to get there. We're working on our detailed integration plans collectively with leaders from both organizations. And we think the combination has really strong operating and financial merit. So that's really our focus. It's not on the short term. It's really on the long term.
Perfect. Thank you.
There are no further questions at this time. I'll turn the call to CEO, Vince Sadusky, for closing remarks.
Yeah, look, thanks, everyone. Thanks for joining us today. As you've heard, 2023 was a good, strong year with growth across our Global Lottery, Gaming, and Play Digital segments. We drove record operating income and EBITDA, and we brought the company's leverage down to the lowest level ever. We truly believe the recent decision to spin off our Global Gaming and Play Digital businesses, and merge them with Everi's existing operations, creates a really exciting opportunity to unlock the full value of our portfolio. We think the creation of two or more focused, or of two more focused companies, better positions them to service customers and create significant value for stakeholders. Thanks for your interest in IGT, and have a great day.
This concludes today's conference call. We thank you all for joining. You may now disconnect your lines.