Aristocrat Leisure Limited

Thank you for standing by and welcome to the Aristocrat FY21 results briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Trevor Croker, Chief Executive Officer and Managing Director. Please go ahead.

Good morning and welcome to Aristocrat's financial results presentation for the fiscal year for 30 September 2021. My name is Trevor Croker, Chief Executive Officer and Managing Director of Aristocrat. It is a pleasure to present Aristocrat's results today along with Julie Cameron Doe, our Chief Financial Officer. Also on the line for today's call is Mitchell Bowen, CEO of Aristocrat Gaming and Chief Transformation Officer and Mike Lane, CEO of Aristocrat Digital. Thank you to everyone for joining us. Turning to our agenda on slide two. Please note that the full details of the full year results are contained in the operating and financial review document released this morning. Today we will step through the presentation deck, beginning with a strategic overview of our business, before moving to group results, highlights of our operational performance and outlook, and finally opening the lines to your questions. Before we begin, please note the usual disclaimer statement available at the back of the presentation deck. References to prior corresponding period, or PCP, relate to the year to 30 September 2020. All references are to Australian dollars unless otherwise indicated. Turning now to slide four. Our results today demonstrate the successful execution of our strategy over the reporting period. Our focus on share-taking through sustained investment in outstanding products, the best people and capability, and strong business fundamentals has remained at the heart of our approach. Today, Aristocrat is a global gaming content technology business and mobile game publisher that is global in scale while also delivering profitable organic growth ahead of category. We're also an increasingly resilient business with 80% of group revenues in the period derived from recurring sources, up from around 50% four years ago. We continue to invest to grow in new adjacent segments, channel and genre opportunities, adding to our diversity and performance momentum. In gaming, we further enhanced our leading position in North American gaming operations during the year, growing the total gaming operations floor as well as our share in addition to a higher average fee per day. We also increased share across key outright sales segments globally. Our games and products continue to be recognised as top performing Our Scrap Games made up 17 of the top 25 premium lease products in North American market on average across fiscal 2021. At the same time, our digital business consolidated its position as a top five publisher in tier one Western markets, delivering world-class games across multiple genres. We continue to focus on growing our pipeline with a series of tuck-in acquisitions and further organic investment, which successfully grew key titles and delivered strong performance across the year. The digital business contributed just over half of total group revenue for the period, further highlighting our success in diversifying and growing our operations. With its global scale and ambitious plans, we believe it's the right time to replace the informal name Aristocrat Digital with a new name and brand that both truly describes our mobile-first publishing operations and helps to facilitate its growth. From today, Aristocrat Digital will be known as Pixel United, abbreviated to PXU. The new name will allow the business to more effectively recruit digital talent and engage potential partners and other stakeholders, while reducing scope for confusion with our aristocrat goals. As aristocrats' total operations continue to become more digital in nature, it's also helpful to clarify any suggestion that only our mobile publishing business has digital characteristics, when that's clearly not the case. There are no broader changes as a result of the rebrand with Big Fish, Product Madness and Plarium continuing to operate as normal under the umbrella of Pixel United rather than Aristocrat Digital. Finally, our strong balance sheet, cash flow generation and available liquidity continues to provide full strategic optionality as we accelerate implementation of our growth plans in the period ahead. Turning to slide five for an update on the proposed acquisition of Playtex. Consistent with the UK Takeover Code requirements and in line with published materials, we are pleased to provide an update on progress since we announced the proposed acquisition of Playtec PLC on 18 October. All relevant materials continue to be available on the Power of Play website, with links also provided to these materials from our Aristocrat Group website. As we shared last month, the proposed acquisition of Playtec is strategically and financially compelling. It will accelerate aristocrats' strategy and provide material scale in the already large and growing $70 billion US online RMG segment. The acquisition will deliver medium-term revenue and earnings growth, in particular in the fast-growing and liberalizing North American online RMG segment, combining aristocrats' core strengths in exceptional gaming content, long-term customer and regulatory relationships with Playtex technology and platforms. Online RMG offers new and complementary growth channels for Aristocrats' land-based gaming business and content, alongside the other significant strategic and financial benefits set out in detail in their disclosures last month. Aristocrats' offer of 680 pence per share in cash provides full, fair and certain value for Playtech shareholders. This represents a 58% premium to the undisturbed share price at the time prior to the firm offer announcement. We also believe that the combined group will provide greater opportunities to Playtex employees. The proposed acquisition has been unanimously recommended by the Playtex board and in addition we received irrevocable undertakings and letters of intent supporting the transaction from Playtex shareholders representing 16.52% of Playtex share capital as of the 15th of November 2021. Richcrab has put in place an interim financing agreement to provide funding certainty to complete the proposed transaction. This has been supported by a successful $1.3 billion equity raise, structured by the way of a pro-rata entitlement offer. The institutional component of the aristocrat equity raise offer saw a strong 92% take-up rate, with 19 of our top 20 institutional shareholders participating in either part or in full. The retail component of the equity raise also successfully closed last week. a strong take-up rate of 78% comfortably exceeding the average of entitlement offers of this type. The Aristocrat Equity raised the structure to provide equitable treatment to all Aristocrat shareholders and we're delighted at the strength of support from our shareholders for the proposed acquisition. Debt financing arrangements are progressing to plan. Aristocrat has received consents from its TLB lenders in connection with existing Aristocrat TLB financing arrangements. We've also received strong support from credit agencies, with S&P moving to a positive outlook. This reflects a potential upgrade to BBB- upon close of the proposed transaction due to the expanded scale, customer and geographical footprint, and more diverse earnings profile of the combined business. In addition, Fitch has initiated coverage with a rating of BBB- and a stable outlook, while Moody's has reaffirmed its rating of BA1, Aristocrat may therefore be considered investment grade upon the close of the proposed acquisition. The regulatory engagement process is also on track and we are focused on progressing this quickly. Aristocrat holds gaming licenses in over 335 gaming jurisdictions including many US states and tribal nations. Aristocrat's long-term engagement with regulators across key gaming jurisdictions together with our strong financial fundamentals, deep customer relationships and established presence in global gaming markets, position us to complete the transaction as planned in the second quarter of calendar year 2022. Finally, we note that Playtech published its SPIN document last Friday, which sets the Playtech shareholder vote on a risk-crash proposed acquisition for 12 January 2022. Playtech has also published a circular in respect of its proposed disposal of the Finalto business which sets 1 December as the date on which FATEC shareholders will be asked to vote on the sale. We look forward to working through the process and providing updates as appropriate. Turning now to slide 6 and a reminder of our established growth strategy. This describes the flywheel effect the Risk Credit is achieving off the back of strong business fundamentals and our preparedness to invest heavily in organic growth and selective M&As. The decisions we've taken have made Aristocrat today even more diversified, resilient and focused than we were in the pre-COVID period. With our financial performance almost back to pre-COVID levels over fiscal 2021, we are ideally placed to accelerate our momentum going forward. Before stepping through the detail of our financial performance for the period, I'd like to take a moment to touch on some of the progress we've achieved against our key pillars of this strategy on slide 7. From a people-first perspective, we're proud to be certified a great place to work in Australia and the US for the first time and in India for an impressive sixth year during the reporting period. We see this as recognition of the efforts we've made in energising our culture and supporting our people, which include our recent pivot to permanent, flexible hybrid work model globally. It also includes innovative engagement, development, retention and incentive strategies deployed over the year. An aggregate engagement score of 8.4 was achieved across the year with 91% participation, which is above relevant technology benchmarks. From a customer perspective, Aristocrat Gaming was named Industry Supplier of the Year at the Global Gaming Awards in Las Vegas in October 2021 for a third year in a row, underscoring our focus on being a supplier of choice to customers in our largest market and across tier gaming segments globally. I previously touched on some of these highlights in terms of our ongoing diversification and business resilience. Over the year, we continued to invest to grow in adjacent gaming segments in the US and in fast-growing mobile gaming genres. In Pixel United, a number of acquisitions were announced to further expand our presence in key game development hubs, including Finland and Poland, to support planned pipeline growth. Over US$520 million was invested in user acquisitions representing 28% of Pixel United revenues, which was the higher end of our 25% to 28% target range. In addition, $528 million was invested in ZMD during the year, representing a market-leading 11% of group revenue for the 12 months to 30th of September 2021. Turning now to slide eight. Our strategy is fundamentally geared to delivering sustainable performance. which means that a robust sustainability program is an important part of our approach. Our sustainability strategy is structured around three pillars and focuses on the issues and the priorities that are most material to our business. These priorities are reviewed periodically and updated in line with progress, materiality and the feedback of our stakeholders. Details of our recent progress will be provided in our sustainability disclosures for fiscal year 2021 which will be published on our group website on the 27th of this month. I encourage you to review the disclosures in full, but would like to take this opportunity to share a few highlights. In terms of our business operations, Aristocrat recently committed to adopting a group-wide science-based greenhouse gas emissions reduction target consistent with the requirements of the Paris Agreement. We have made investments in improved data capturing and specialist capability in order to deliver this goal. We've also continued to lift the bar in corporate governance, reflecting the fact that this is one of our most material ESG priorities. In responsible gameplay, we delivered a raft of initiatives, including new tools, features and functionality to enhance player information and choice across our gaming and social casino products. We also achieved support for an Australian-first trial of cashless gaming technology in New South Wales, in partnership with the government, the regulator and our customer. We look forward to that trial launching early in the new calendar year now that venues in New South Wales have been able to reopen. In terms of our people and community, I've mentioned our Great Places to Work certifications and our strong engagement results. I would add that we are pleased to have delivered our 2021 gender equity commitments in full and have moved to adopt higher targets for the 2022 to 2025 period. These will also be set out in our disclosures in detail. Of course, we readily acknowledge that our ESG journey is an ongoing one with plenty still to do, but we are excited by the progress we're making and the impact our efforts are having, particularly with respect to our culture and engagement. We're also pleased at the quality of conversations we're having with customers, players, partners and other stakeholders about shared initiatives and a focus on the longer term. Turning now to enterprise transformation on slide nine. This provides some context as to how we're investing in our core business capability to facilitate ongoing transformation in our scale and velocity. In other words, we're increasingly focused on ensuring Aristocrat is not only becoming bigger but also better, meaning more resilient and diverse, more innovative and much more capable of digesting change. We think about our effort in three buckets, the first being key portfolio initiatives. These aim to scale and diversify existing businesses, explore and enter attractive adjacencies and to establish a pipeline of new growth options and convergent opportunities. Major focus areas include strategy execution, talent development and increasing organisational capability. It also includes ESG, where we're focused on our most material priorities in strong governance, promoting responsible gameplay, employee engagement and diversity and inclusion. The second bucket comprises integration and change management initiatives, while the third area is all about accelerating productivity. This band's initiatives focus on process management and data and analytics. This transformation effort is ongoing and will underpin our ability to sustain our strong growth long term and fully implement our strategy. I'll now turn to a summary of our group performance for the year, building on the market disclosures released on 18 October. Turning to slide 10. Over the years of 30 September 2021, the group delivered strong growth and a high quality result. that reflect the successful execution of our strategy and the sustained levels of market leading investment I outlined earlier. Normalised profit after tax and before amortisation of acquired intangibles or MPAT-A of $865 million represents an increase of 81% in reported terms and an impressive 102% in constant currency compared to the PCP reflecting outstanding product and portfolio performance. with profitable growth and margin expansion across both gaming and pixel-united segments. This result is only 3% below the pre-COVID financial year 2019 result of $894.4 million despite the unfavourable foreign currency impact and with not all markets fully operational during the period. Earnings before interest, tax, depreciation and amortisation or EBITDA of $1.5 billion represents an increase of 43% in reported terms and 58% in constant currency compared to the PCP. With strong operating cash flow of over $1.3 billion, up 30% compared to the PCP, the Group's balance sheet remains robust with over $2.7 billion in available funds and a net debt to EBITDA ratio of 0.5 times as at 30 September 2021. The directors have authorised a fully franked dividend of 26 cents per share or $174 million in respect to the period ended 30 September 2021. The record date will be 2 December and the payment date will be 17 December 2021. I'll now invite Julie to take us through further details of the group results on slide 12. Julie.

Thank you Trevor and good morning everyone. The profitable growth we've reported today came on the back of stronger revenue across both the Aristocrat Gaming and Pixel United businesses to $4.7 billion, up 14% in reported terms and 25% in constant currency. Increased operating leverage further enhanced the results, demonstrating the quality of earnings delivered in the period. EBITDA increased 43% compared to the PCP, as Trevor mentioned, and the EBITDA margin expanded to 32.6%, from 26.1%. Fully diluted earnings per share before amortization of acquired intangibles of 135.6 cents represents an 82% increase compared to the PCP. During the year, the group adopted the new IFRS accounting interpretation in relation to configuration and customization costs incurred in implementing software as a service arrangement with cloud providers. While this had no overall impact on the result, I would draw your attention to the restatement of the prior year comparative across the financial statements, which is consistent with the new IFRS guidance. Slide 13 sets out the composition of aristocrats' reported NPAT-A performance of $865 million, normalized for significant items and compared to the PCP. The 81% in NPAT-A during the year was driven by over $415 million in incremental profit from the emeritus gaming business with a significant contribution from gaming operations, combining growth in install base and fee per day. Growth was also seen across the ANZ gaming business, despite extended lockdowns in the key jurisdictions of New South Wales and Victoria. The result was partly offset by weakness in the international gaming segment, which continued to be impacted by venue closures or travel restrictions across key regions. Pixel United delivered $120 million in incremental profit, reflecting profitable growth in social casinos and the impact of continuous scaling of key world-class games such as Raid Shadow Legends. Higher corporate and other costs reflected increased investment in enterprise transformation, people, and capability, and the group's market-leading investment in D&D was consistent with our growth strategy. The result was offset by almost $100 million in unfavorable foreign exchange movements compared to the PCP, turning now to slide 14. The group generated over $1.3 billion in operating cash flow, up 30% compared to the PCP. The interest and tax expense line increased 77%, driven by higher taxes paid in line with improved business performance and the deferral of fiscal 2020 payments to the reporting period due to COVID-19. Capital expenditure was over $200 million in the year, primarily comprised of continued investment in hardware to support growth in the Americas gaming operations installed base. Significant non-cash items in the period related to the remaining contingent clarion retention arrangements and the big fish owner's lease provision. The change in net working capital is stated after the payment of the CATA and SEMIGAD illegal settlement as disclosed at the hearth. Moving now to capital investments and our balance sheet, slide 15. Aristocrat continues to allocate capital according to our established priorities in order to promote long-term growth and appropriate shareholder return. During the year, as Trevor highlighted, we committed $528 million in D&D to further strengthen our product portfolios. We also invested $521 million in user acquisition to grow our mobile games business, Pixel United. and over $200 million in capex as previously noted. We continue to prioritize capital for M&A to accelerate our growth as recently highlighted by our offer to acquire Playtech. From a capital return perspective, we maintain our discretionary dividend policy. As previously disclosed and consistent with our established track record, Aristocat would expect to resume deleveraging following the completion of the Playtech acquisition. The group's strong balance sheet and liquidity position as of 30th of September 2021 continues to provide us with financial strength, flexibility, and full optionality to pursue our growth strategy. Net debt of $805 million at period end is down from $1.6 billion the previous year and represents a net debt to EBITDA leverage ratio of 0.5 times. At 30th of September 2021, Aristocrat had total liquidity of over $2.7 billion comprised of cash, and available revolving credit facilities of $277 million. Our debt facilities, largely drawn from the U.S. home loan B market, remain competitively priced at a weighted average of LIBOR plus 250 basis points. Credit agreements remain covenant light and provide the group with financial flexibility. That completes the overview of group results. I will now pass back to Trevor to comment on operational performance and outlook for the 2022 financial year. Trevor.