Aristocrat Leisure Limited

Thank you for standing by and welcome to the Request Academy fiscal year 2023 results call. All participants are in 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 one on your telephone keypad. I'd now like to turn the conference over to Mr. Trevor Oker, CEO and Managing Director. Thank you, sir.

Please go ahead now. Good morning and welcome to Aristocrat's financial results presentation for the full year to 30 September 2023. My name is Trevor Croker, Chief Executive Officer and Managing Director of Aristocrat. I'd like to begin by acknowledging the Wattamatical clan of the Eora people, traditional owners in the land on which we meet today, and I pay my respects to elders past and present. With me in Sydney are Sally Denby, our Chief Financial Officer, Mitchell Bowen, CEO of Anaxi and Chief Transformation Officer, and Hector Fernandez, CEO of Aristocrat Gaming. Today, I will step through highlights of the results and provide an update on our strategy and sustainability performance. Sally will then discuss our group financial results and balance sheet, after which I'll run through the operational performance and outlook. Please note the usual disclaimer statement at the back of the deck. Turning now to slide two. I'm proud of the high-quality result that we have announced today. The growth of the risk trap delivered over the period demonstrates the ongoing resilience, scale, competitiveness and diversification of our portfolio and sound fundamentals in the markets in which we operate, even as we navigate at mixed conditions. At the same time, we've been able to accelerate investment behind our successful growth strategy. While the world around us remains volatile, our team managed the conflict in Ukraine and more recently in Israel with empathy and effectiveness and will continue to do so as any further upheaval in these regions unfolds. Turning to the numbers, we reported 13% growth in revenues at group level compared to the prior corresponding period, or PCP, or 7% in constant currency, driven by a continued strong performance from the aristocrat gaming America's business, partly offset by mixed conditions for the mobile gaming market at Pixel United. EBITDA margins were 20 basis points higher than PCP, This stability reflects easing supply chain pressure in our gaming business, offset by the mixed impact from strong growth reported for outright sales. The margin pressure we reported for Pixel in the first half of the financial 23 has been effectively managed in the second half. The group's MPAD-A result of around $1.3 billion represents a profit improvement of 21% in reported terms and 13% in constant currency compared to PCP. Our strong free cash flow generation was applied to fund both organic and inorganic growth, while surplus cash has been returned to shareholders through dividends and on-market share buybacks in line with the group's capital allocation framework. In terms of outlook, Arisca plans to deliver MPA growth over the full years of 30 September 2024. We continue to monitor the macroeconomic environment and consumer sentiment closely and believe that our diversified portfolio provides resilience, through economic cycles. I'll return to provide more detail on our outlook expectations at the end of this presentation. Turning to slide four. The benefit of our strategic investments to grow and diversify aristocrat was particularly evident in the strong 7% constant currency revenue and EBITDA growth over the year. This was underpinned by an exceptional gaming performance, which more than offset the impact of an industry-wide moderation in mobile game demand. again highlighting diversification and scale as fundamental strengths of our business. Strong investment in organic and acquisitive growth initiatives continued in fiscal 2023. A risk-crash group growth strategy is anchored in leveraging world-leading game content at scale and across an expanding number of attractive verticals. We chose to invest in more product and core infrastructure technology to position the business to execute our strategies while also improving our cybersecurity, data and other vital capabilities. Organic investment in talent and innovation accelerated to pursue gaming adjacencies and expand our capabilities in both gaming and Pixel United. Focusing on online RMG, which is a strategic priority for growth and diversification, Aristocrat made significant progress over financial 23. This involves successfully building out our dedicated online RMG business unit, Anaxi, and increased D&D investment in technology to facilitate the development of our growing iGaming games suite. The acquisition of Roxul was completed and the proposed acquisition of Neogames was announced. We believe Neogames will deliver numerous strategic benefits to the group, expanding market opportunities and adding vital capabilities that will unlock our full potential customers. to become the leading and most trusted global online RMG provider. Our consistently strong investment once again delivered above industry performance in key segments and drove market share gains. Some portfolio highlights for each business are referenced on the right-hand side, and you'll note a number of other references to our leading and improving share performance in key markets and segments throughout the presentation. Turning to slide five. Throughout 2023, Aristocrat continued to invest in executing our sustainability strategy, driving improvements and further lifting maturity in our most important priorities across the pillars of business operations, product responsibility and people and community. Aristocrat will publish comprehensive disclosures covering our progress on our group website on the 1st of December. I'd encourage you to review these in detail and also remind you that we are hosting our first ever ESG focus session at our Sydney office on 5 December. This will be an opportunity to hear directly from our subject matter experts and business leaders, ask questions and better understand our priorities and progress across this important agenda. The event will be webcast for those unable to make it physically. Please reach out to our investor relations if you haven't yet signed up and want to participate. I'll just mention a few highlights here. Responsible gameplay remains Aristocrat's highest leadership sustainability priority. It is increasingly part of the DNA of our organisation and we regard it as vital to the delivery of our growth strategy. Over financial 23, we continue to strengthen RG governance with the launch of a new suite of tailored policies and compulsory training rolled out across the business. We also completed Australia's first cashless gaming trial with lessons learned already being factored into the next generation of trial technology. We continue to innovate in player education and engagement, launching our first ever positive player consumer marketing campaign in the US, and rolling out the next generation of targeted player messaging in a key social casino app. We continue to take an iterative approach to testing and learning to refine and expand our efforts. In terms of climate, Aristocrat took a big step forward with the development of an enterprise-wide greenhouse gas inventory off a 2022 baseline. We also drafted and have now submitted science-based emission reduction targets to the SPC initiative and expect validation of these targets in the first half of calendar 24. We've also updated our supply code of conduct, further embedding climate, anti-modern slavery and other key commitments throughout our supply chain. In people and community, the representation of women on our board increased to over 44%, on our executive team to over 45%, and across the group, total representation of women stood at over 32%, shifting us closer to our mid-term published targets. Teams right across the business were engaged in these efforts, and I'm proud that our sustainability agenda has strong volume among our people and has become part of our culture and an expression of our aristocrats' values. We will continue to take an ambitious and strategic approach to sustainability to ensure that we're able to grow and deliver benefits to our shareholders and all stakeholders over the longer term. I'll now hand over to Sally who will take us through a summary of the group results and provide an update on capital and our balance sheet.

Thanks Trevor and good morning everyone. Turning to slide seven, our group results summary. Over the 12 months to 30 September 2023, Aristocrat delivered MPAT-A of over $1.3 billion. This represents an increase of 21% in reported terms and 13% in constant currency. On a fully diluted EPS basis, growth was further boosted by our on-market shared buyback program, increasing 26% in reported currency. Revenue increased 13% to almost $6.3 billion. On a constant currency basis, revenue was 7% higher than the PCP, reflecting the standout result achieved for gaming outright sales and another leading performance from North American gaming operations. Pixel United demonstrated resilience in an environment where mobile gaming demand was mixed, achieving broadly stable revenues in the second half of the year of comparative numbers eased. EBITDA was 14% higher than the PCP. and up 7% in constant currency. This reflected slightly higher margins than aristocrat gaming. We were pleased to report modest growth in Pixel United's profit in the second half, as we committed to at the first half result in May, mainly reflecting efficient investment in new air. Active management of operating costs to align the cost base to evolving market conditions was also undertaken in the second half, which will deliver benefits to Pixel United in future periods. Operating cash flow of almost $1.8 billion was comfortably above the PCP. We continued to return excess cash to shareholders, with $811 million returned through dividends and on-market share buybacks in the period. The directors have authorised a fully franked final dividend of $0.34 per share in respect of the period ended 30 September 2023. I'll now move to slide 8. The slide provides a snapshot of the key drivers of Empire Air growth. As you will observe, the profit increase from aristocrat gaming, driven by growth in the premium Class 3 gaming operations installed there, outright sales in America, and a strong recovery in our international Class 3 business, was partly offset by a decrease in Pixel United's post-tax earnings as previously referenced. Strong operational performance allowed us to actively increase investment in D&D over the course of the year, increasing to 13% of our revenue, above our historical 11% to 12% range. This represents an additional $90 million NPA investment in our strategy and in future growth. As referenced earlier, we directed this investment in talent, products, and technology to grow across a range of priority segments and genres, establish an Axie, integrate RockSource, scaling online RMG, and lift core product technology infrastructure and capabilities. Finally, there are some non-operational features that I would also like to highlight. MPI-A growth benefited from higher interest income arising from the increase in interest rates and was also positively impacted by foreign exchange translation. Sending now to cash flows on slide nine. Aristocrats' high quality results for financial 23 is evident in our strong cash flow generation over the year. reflecting the positive underlying business performance and higher interest income, partly offset by other increases in working capital. Increased net working capital has been a recurring feature in recent half to meet customer order fulfillment, and this moderated over the second half of the year. Robust cash flow generation was utilized to fund investment in our install base in North America and the Roxor acquisitions. Aristocrat returned $443 million to shareholders in the form of share buybacks during the year, with $755 million returned to shareholders today. At period end, Aristocrat completed just over 50% of our $1.5 billion on-market share buyback program. Turning now to our capital investment priorities on slide 10. Aristocrat continues to focus capital allocation on supporting our long-term growth strategy and maximising shareholder returns. In particular, the business drives organic growth through consistently strong and disciplined D&D spend, UA and CapEx investment, while also pursuing strategic M&A opportunities to accelerate progress in line with our rigorous criteria. Over the reporting period, Aristocrat invested $820 million in D&D, to further strengthen our product portfolios and support our entry into online RNG. This is tracking above our 11% to 12% historical range, which I will address in more detail on the following slide. Capital management remains the focus as we manage our balance sheet through cycles of investment in inorganic growth. We are targeting a leverage ratio representing net debt to EBITDA of one to two times over the medium term, and we expect to return to a geared position after the proposed acquisition of Neo Games closes in the first half of calendar 24. The ability to move outside this gearing range for strategically attractive acquisitions is in line with our historical approach and provides flexibility to retain cash to shareholders through dividends and on-market share buybacks. Now turning to slide 11. Before handing back to Trevor, I would like to focus on our investment in organic growth. The chart on the left tracks investments over the past four years, and the right shows changes over the past four half. Priorities across our business portfolios do change as we optimize returns and respond to growth opportunities. A recurring feature is the ongoing discipline in our approach to investment across the group. This total investment has tracked around 30% of group revenues over the past few years, with investment lifting to over $1 billion in the second half of financial 23. The lifting D&D spend reflects the growth of our gaming business to support our studio's increased investment in product technology, to accelerate entry and scaling in the maxi, and the acquisition of Rockstar in January. Pixel United contributed $319 million to the $820 million of D&D spend, an increase of $45 million over a financial year. Although UA investment in Pixel United declined over the year, reflecting maturity of certain game titles and a dynamic approach to investing, reduced UA spend was partly offset by additional D&D investments. This reflects our ongoing commitment to investment in Pixel United Studios and creative capabilities. Finally, the increase in capex reflects Aristocrat Gaming's investment in almost 5,000 additional units in the install base of a financial 2023. with close to 3,000 of these being placed in the second half. This completes the overview of group results. I will now hand back to Trevor, who will step through the operational performance.