Light & Wonder, Inc.

Welcome to the Light and Wonder 2022 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question during the presentation, you may do so by pressing star 1 on the telephone keypad. Now, let me turn the call over to Steve Wang, Director of Investor Relations for Light and Wonder. Mr. Wang, you may

Thank you, Operator, and good afternoon, everyone. During today's call, we will discuss our fourth quarter and four-year 2022 results and operating performance, followed by a Q&A session. With me today are CEO Matt Wilson and CFO Connie James. Our call today will contain forward-looking statements, and they may involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call. For information regarding these risks and uncertainties, please refer to our earnings materials relating to this call posted on our website and our SEC filings. We will also discuss the non-GAAP financial measures. The description of each non-GAAP measure and the reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our earnings release as well as in the investor section on our website. In 2022, we completed a sale of our lottery business to Brookfield Business Partners in the second quarter and the sale of the sports betting business to Endeavor in the third quarter. Accordingly, we have reflected these businesses as discontinued operations in our consolidated statements of operations for all periods presented. We are reporting our results of continuing operations in three business segments, gaming, side play, and iGaming. Amounts and disclosures referring to combined include both our continuing and discontinued operations. As a reminder, this conference call is being recorded. A replay of this webcast and accompanying materials will be archived in the Investors section of our website. With that, I'm pleased to turn the call over to Matt.

Thank you, Steve, and thanks to everyone for joining today's call. 2022 was a pivotal year for Light and Wonder. At our inaugural Investor Day last May, our team laid out a clear strategic plan and long-term targets to enhance shareholder value. We continue to deliver on that ambitious transformation plan with speed and urgency by positioning ourselves to win when it comes to performance and the successful execution of our business operations. In fact, we delivered double-digit top and bottom line growth year over year. Fourth quarter consolidated revenue increased 18%, with significant growth across all line of businesses. For the full year, consolidated revenue grew 17%, which is even more impressive when you normalize with the $44 million VAT benefit in 2021. We transformed ourselves into a streamlined, integrated organization with a reconstituted balance sheet and a clear focus on our core mission of becoming the leading cross-platform global gains company. We now have significant momentum in 2023, which sets us up for continued success towards our $1.4 billion targeted, consolidated EBITDA by 2025. Let's start with some highlights. Light and Wonder has seen continued strength in gross gaming revenue, further proof of the resilience of our industry, and the simple fact that at the heart of our business, people love to play games. In this quarter, our games and platforms drove record success across all three of our business units. Gaming saw a record 10th consecutive quarter of North American premium install base growth. In all, a record 45% of our North American install base is now premium, representing an enormously valuable profit center for us. BuyPlay generated record revenue, record payer conversion, and record up-down, as our investments continue to drive engagement and monetization. And iGaming saw record GGR on our content aggregation platform, OGS. amid record performance by our original content. The scalability of our platform has led to record quarters for our new iGaming Studio Edition, Elk and Lightning Box, the latter of which experienced its fifth sequential quarter of growth under our management. Our fundamentals remain healthy, and we expect them to continue to drive results. In addition to continued GGR strength, we continue to see elevated revenue per day levels. Many of our operator partners have announced solid earnings, and we've also seen healthy player spend and engagement for our side play games. All of these factors ladder up to one key takeaway. We're executing successfully on the strategic vision underlying the long-range targets. Let's look at how we achieved that in Q4. As we discussed at Invest Today last May, the key growth drivers for gaming, aside from the ongoing market recovery, include our robust product roadmap, and share games in gaming operations and game sales. In Q4, the cabinets and games we've already launched enabled us to deliver impressive results in our largest and most profitable segments. Meanwhile, revenue per day continues to remain well above 2019 levels, a clear reflection of the industry's resilience and the performance of our games. A great example of this is the great Ultimate Firelink franchise, which continues to be a key catalyst for growth for our mural install base. In our game sales segment, more than 5,000 units were shipped in North America, something we haven't done since 2019, and more than 7,700 units globally. In fact, we sold 31% more Cascada dual-screen cabinets in its first year of launch compared to the Cascada Portrait, shattering the record of our historical best J43 cabinet. And our landmark 7,000 remained the number one stepper cabinet in the January Eilish Report. Coincidentally, The Cascada Dual Screen just won the Best Cabinet Award, and Landmark 7000 walked away with the Best Mechanical Real Game Award at the fifth annual EKG Slot Awards show. All of this success is underpinned by chart-topping games like Huff & More Puffs, Rich Little Piggies, Dancing Drums Prosperity, and Blazing Triple Sevens, all of which are extensions of our evergreen franchises. Additionally, we've further progressed into the VLT market on a recent partnership with the Oregon Lotteries. continuing our commitment of expanding into adjacencies. Turning to Australia, we continue to take share, ending 2022 around 500 basis points higher than 2019 levels in the full sale market. Our popular game, Dragon Unleashed, reached 2,000 games installed, and Thunder Drums is now among the top four games in Queensland. I'm also pleased to share that we achieved number one share in New South Wales clubs in January, our first here at Light and Wonder. in a market where we've made significant progress in just over a year, a clear demonstration of our ability to take share in our priority markets. Our success in Q4 also extended to our systems business. John Wolfe has made an enormous impact in this space, both through his leadership and with the complementary technology brought in from House Advantage. For example, we expanded our base of loyalty installs in the quarter and saw further momentum in cashless. doubling the number of machines featuring cashless enablement compared to last year. Meanwhile, in tables, we continue to have the leading products and IP in the space. We saw growth across our entire portfolio and our revolutionary shuffle of products, providing critical data analytics, promoting efficiency for operators. And with more subscribers to our Vault program, we continue to add to our recurring revenue strength. So we entered 2023 with fantastic momentum, and notably with a full pipeline of products and games that will continue to fuel our growth. GDOX, led by our award-winning game designer, Ted Harsey, who's delivered some of the biggest hits the industry has ever seen, will soon be launching two great games, Dragon, Jin Long, Jing Bao, and Monsters Frankenstein. We're also eagerly anticipating the launch of our new cosmic cabinet in Q2, with proven franchises like Monopoly and Ultimate Firelink cashfalls hitting the floors. What's more, this will be the very first year in which we have a premium product in every key category and every key segment, an unprecedented opportunity to further advance our vision as we launch more extensions of our evergreen franchises like Dancing Drums and Goldfish. Our recent systems wins solidified our leading position and improved our value proposition, as we can now offer enhanced capabilities through seamless integrations. Our enterprise systems offerings are exceptional, providing longevity and fast to go to market time, and they're ready to be deployed for both new and existing customers. Looking forward in our tables business, we will continue to roll out enhancements on our hybrid ETG platform to increase tournament functionality, allowing operators to attract more players as we continue to provide leading table products that offer value to casinos. Our results in Q4 as well as throughout the year, demonstrate that we are delivering on our commitments. We anticipate that operators will continue to invest in their floors and that our leading talent and product portfolio will put us in a position to take additional share. That means even greater growth is on the horizon. Let's turn our attention to Sideplay. At Invest Today, we talked about our key growth drivers, outpacing the social casino market, scaling up and closing the gap with our peers. and investing in both our SciPlay engine and our product roadmap. And in Q4, we executed successfully across all of these areas. In fact, according to Eilers, SciPlay was the standout performer among the top social casino operators in Q4 and was crowned number one social casino operator at the EKG SWOT Awards just last week. SciPlay continued to increase market share, and posted a record revenue quarter up 18% year-over-year to $182 million. Two of our largest games, Jackpot Party and Quick Hit Slots, set revenue records of their own. For the year, we delivered record revenue of $671 million, up 11%. These records validate the investments we've made to enhance Sitesway's core capabilities and product roadmap. Engagement also grew, and we set records and monetization KPIs. a landmark achievement, and a major step towards scaling our up-down. SciPlay continued to evolve its data-driven approach, propelling ad tech capabilities significantly ahead of the industry, and made several notable advancements that boosted ad tech by combining team learning with multiple data sources, predictive analytics, and valuable in-game advertising processes and strategies from our newly acquired Ellictus. Additionally, SciPlay is testing its direct-to-consumer platform, which will enhance player relationship management and increase its global reach, accelerating the potential to expand margins over the long term and enhance player lifetime value. Entering 2023, we'll be accelerating strategies to continue our industry-leading social casino growth and take additional market share. We'll continue to invest in our best-in-class efficiency of ad tech capabilities and improve returns on US spend. Additionally, we'll make prudent expansions into new games via our core social casino product roadmap. In short, we're going to keep doing what we know works, investing in our capabilities and product roadmap to drive player engagement and loyalty while continuing to grow monetization, particularly of our core franchises, further differentiating our offerings from those of our peers. This is the power of our cross-platform strategy. For all of the records we've set in Q4, we're only just getting started. Let's turn to iGaming. where we are uniquely positioned to succeed as the industry continues to expand. Q4 underlined the value of our leadership position in the industry, as US GGR experienced its ninth consecutive quarter of growth, up 12% sequentially. We also saw significant growth in Canada, where GGR was up for the fifth consecutive quarter. And in both the EU and the UK, we saw our third consecutive quarter of GGR growth, with the EU up 17%, and the UK up 27% over that period. We are the leader in this space because of our best-in-class content aggregation platform and because of our unmatched first-party content. In Q4, we saw strong first-party launches, including Terrific Tiger, the fourth in the Coin Combo series. Looking at the top 20 games in the US on our OGS, roughly 75% of those are proprietary content, underlining once again that players love to play games across multiple platforms. In Q4, we also expanded our portfolio internationally with a regionalized approach, leading to launches such as Rainbow Riches Power Pitch and Crops of Cash, Stash and Grab Frenzy, and Raging Rhino Mighty Ways. We are also pleased with our recent cross-platform launch of one of our most recognized games, the Fudukai Grand, as our operator partners revealed that it's one of the best performing launches ever on their platform. And we continue to see strong performance across all three channels. These launches illustrate the power of our organic content development roadmap and our cross-platform approach. Going forward, we're doubling down on this successful strategy and accelerating our cross-platform approach to content development. You can now expect two of our top-performing land-based titles being launched digitally each month and additional games coming from the studios we've acquired. Meanwhile, our live casino studio in Michigan received provisional licensing approvals. and we're ready to bring our offering to market. This segment is a key driver to iGaming's long-term growth, representing as much as 30% of the TAM, and we're ready to compete and win with our full suite of table games offerings. Looking internationally, 2023 will be a year of continued strength through the regionalised roadmaps that have already brought us such success, as well as further expansion into new markets. We know that the digitalisation of gaming is only going to continue, with new jurisdictions poised to come online in 2023 and beyond. Light & Wonder is strategically positioned to capitalize on those growth opportunities that come with it. When we reflect on the tremendous progress of the last year, it's easy to see why we're so excited about what's next. Gaming continues to execute on a product roadmap designed to capture share. Sideplay continues to outpace the market thanks to enhancement to its core capabilities and a growing pipeline of great games. and iGaming continues its leadership position with original content in a rapidly expanding marketplace. We are entering 2023 with incredible momentum thanks to our successful fourth quarter and with a clear strategy in place for future growth. All the major pieces are in place. An unparalleled suite of assets and intellectual property. A cross-platform strategic approach that is already bearing fruit with prudent franchises that performed well across gaming, SciPlay, and iGaming. We expect eight key game themes to launch across all three platforms throughout 2023. Our revitalized R&D program, which is focused on developing and deploying the next generation of industry-defining content. The investments we've made in this program and the work we've done to integrate its focus and operations are fueling sustainable growth across our businesses. The industry's best talent, whose fingerprints are all over the games we will be launching this year, And most of all, a clear vision and strategic path that unifies and motivates our entire team like never before, becoming the leading cross-platform global games company. One more thing I'd like to add. We always say that great games are made by great people. At Light and Wonder, we put a focus on culture because it's the key to attracting and retaining the very best people in the industry. Our focus on culture also fuels our efforts around environmental, social, and corporate governance. We're now aligned to 12 of the 17 categories of the United Nations Sustainable Development Goals. And we're also partnered with 20 responsible gaming organisations and campaigns globally. Further, we were proud to take home the DE&I Award of the Year at the Women in Gaming Diversity Awards. Enlightened Wonder ranked among the top four gaming companies globally by the All In Diversity DE&I Index. In closing, We kicked off 2023 with new energy and excitement within our organisation and with good reason. As the fantastic results from Q4 illustrate, we entered this year with significant strength, putting us on a clear path to delivering on our long-range targets that we laid out last May. I am so proud of what this team has achieved and so grateful to every single employee that made this success possible. I think I speak for everyone when I say the best is yet to come. The future of Light and Wonder is brighter than ever. We're ready to deliver on the promise of sustainable growth as we lead the industry forward. Thank you. Now let's turn things over to Connie.