Light & Wonder, Inc.

Welcome to the Light and Wonder 2023 First Quarter 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. I will now like to turn the call over to Nick Zangieri, Senior Vice President of Investor Relations for Light and Wonder. Mr. Zangieri, you may begin.

Thank you operator and good afternoon everyone and welcome to our first quarter 2023 earnings conference call. With me today are our CEO Matt Wilson and CFO Connie James. During today's call we will discuss our first quarter 2023 results and operating performance followed by a question and answer session. Our call today will contain forward-looking statements that 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 filings with the SEC. We will also discuss certain non-GAAP financial measures. A description of each non-GAAP measure and a 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 the sale of the 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. 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 will now turn the call over to Matt.

Thank you, Nick, and thanks to everyone for joining today's call. We're off to a fantastic start in 2023, continuing the momentum we established last year. We're now past the one-year mark as the new light and wonder, and while we've accomplished a great deal, we believe the best is yet to come. We have a talented team driving a powerful R&D engine that is fueling our portfolio across all three businesses and has enabled us to begin the year with an entire pipeline of exciting products and games. As our first quarter results demonstrate, we are making continued progress towards the execution of our cross-platform roadmap and long-term goals, and have delivered on several key metrics including double-digit top and bottom line growth on a year-on-year basis, consolidated revenues increasing by 17%, and we achieved record quarterly revenues in both SyPlay and iGaming. I've been in the gaming industry long enough to know that compelling content drives success. Continued streamlining of our R&D efforts will better serve our business units and position us to win the long game. As a result, we've achieved enhanced collaboration in research, increased development velocity, and faster delivery to market of new and improved products and integrated solutions. A demonstration of our unique cross-platform approach is with our operator partner, ECLC, who launched a Fudukai Grand in both LAN-based and iGaming channels, showcasing increased engagement, driving significant results and player insight. This follows on from last year's Monopoly Lunar New Year release, and we will continue to work with our partners on cross-channel promotion and expect both our original LAN-based content and digital native content to be deployed more broadly. These steps are accelerating the progress of our cross-platform strategy. The expanded benefits of these initiatives are expected to be realized over the coming quarters as our integrated global R&D platform ramps up. While executing on core business fundamentals, we are always looking at ways to expand our share of the total addressable market to continue creating shareholder value. Offering the light and wonder investment opportunity to a broader base of investors is yet another way. Given the positive sentiment we've received from Australian investors, we're excited to pursue a secondary listing on the Australian Stock Exchange, which we believe will complement our existing shareholder base. The ASX is a premium market with a long track record as a platform for global gaming companies and a deep and liquid pool of investors and market participants who understand the gaming business. We believe this secondary listing will stimulate demand for our shares by providing accessibility to institutional investors who are unable to invest offshore, as well as increasing analyst coverage and expanding retail ownership. This is an important market for us and a natural progression of our strategy. In regards to timing, we expect ASX listing approval by the end of the second quarter. With our healthy business fundamentals, talented global team, a clear product roadmap, and execution against our strategy, we continue to build the right momentum as we progress towards the $1.4 billion 2025 consolidated Aebitda target. Now let's review our business segment highlights, starting with gaming. We've made considerable progress deploying proven content across key markets. In gaming operations, we grew North American premium units for the 11th consecutive quarter, achieving a record 46% of our North American install base. Recently, these efforts have been acknowledged. According to the most recent IWAS report, Ultimate Firelink Explosion remains at the top of the new premium release games chart. Likewise, Journey to Planet Moolah debuted as the number one wide-area progressive games in the category. Ted Harsey's Studio X launched its first game, Dragons' Jin Long Jin Bao, during the first quarter, and while it's early days, we're already seeing exceptional performance. We have a robust product pipeline, which gives me great confidence in our ability to progress significantly in the premium space. The second quarter outlook is looking very promising as well as we roll out Cosmic, one of our newest cabinets. Highly anticipated games, including Monsters, Frankenstein, and Ultimate Final in Cash Falls are already performing well above our expectations, even though they've just started rolling out the casino floors in the last few weeks. Likewise, our roadmap of new games and franchise extensions will continue to drive momentum in our gaming operations fleet. Turning to game sales, we returned to significant growth, shipping over 7,600 units globally, with 4,000 units in North America and 3,600 units internationally. The robust demand in game sales led to $158 million in revenue for the first quarter, translating to over 50% growth year over year, well above 2019 first quarter levels and even above the seasonally stronger fourth quarter we reported in 2022. We're encouraged that the industry is showing replacement growth as operators continue to invest in their floors. For example, in the North American replacement sale market, we shipped over 3,700 units. As we look forward, we're excited to expand our presence in adjacent markets, such as video lottery terminals and historical horse racing, and further increase our share over time. In Australia, our renewed focus allowed us to increase our market share to over 20% in the quarter. This was partly driven by the strong performance of Thunder Drums driving record Q1 ship share, a testament to the talented teams that we've assembled in our studios. For us, Australia is a bellwether for scaling successful games globally, with proven game mechanics that can also be leveraged in other markets. Given the significant gains we've made in Australia, we also believe we can win a more substantial share of the North American market with the right focus and the right execution. It's also worth noting that we recently achieved number one floor share with a new property opening in Asia, where we have a strong footprint, and it's great to see that market open back up. Additionally, we are proud to report that Cascada Jewel Screen and Landmark 7000 remain the number one cabinets in their respective categories for yet another quarter on island. We see a solid sales pipeline for the Cosmic Cabinet and the Cascada Slant, which is scheduled to launch in late May. players should expect popular franchise extensions like Dancing Drums, Power Trio, and Goldfish Boost to launch on these cabinets as well. We're off to a great start and have significant confidence going into the second half of the year, especially when we consider the pipeline of new content. On to systems, where our strategy calls for integrating enhanced capabilities on top of our existing platforms to solidify our leadership position. Recent wins reflect the significant progress that we've made. The announced installation for Park Shippingburg in Pennsylvania is a testament to our enhanced offering, allowing cashless play, interactive promotions on the floor, registration and account management via a mobile app, and further modern enhancements. In another win, we were selected as assistance provider for Naskilla Casino in Texas. With this new partnership, we were able to fully demonstrate that our products comprise an expansive portfolio of casino management systems, hardware, and software that enable our customers to deliver best-in-class experiences for their players at all points of business. The value proposition we are offering in the systems business is clearly gaining momentum, as we saw continued strong interest from our operator partners. Lastly, in tables, we continue to maintain our industry-leading position, leveraging our proprietary table games and shuffleboard products, where we continue to focus on innovations in both hardware and software solutions. Overall, we saw a great quarter underpinned by a robust product portfolio and momentum from 2022 that propelled us into the new year. Our growing franchise extensions and new Cosmic and Cascada slant cabinets give me great confidence in our ability to execute as operators continue to invest and refresh their floors. Let's turn to site play. The momentum we established last year continued in the first quarter and the investments we made over the past 18 months are being validated with significant share gains. SidePlay extended its winning streak in the social casino market, once again exceeding market performance, with 18% year-over-year growth on record revenue of $186 million. This also marked the second consecutive quarter of record earnings for Jackpot Party Casino and the fifth for Quick Hit Slots. We continue to see high repeat player activity at SidePlay, signifying the value players see in our game. SidePlay has improved in-game economics and monetisation metrics via LiveOps. resulting in record monthly paying users and a record upsell at 89 cents in the quarter. Additionally, the soft launch of our direct-to-consumer platform in the quarter is yet another step towards enhancing our ability to capture long-term margin expansion and gain competitive advantage. SciPlay has also built various engagement models into its platform, which can be scaled across other games. For example, applying in-game events across one ecosystem gives players a seamless experience across multiple games. We will continue to leverage our best-in-class efficiency of ad tech capabilities and improve returns on UA spend. Additionally, we'll make prudent expansions into new games via our core social casino product roadmap, further differentiating Sideplay's offerings from its industry peers, capitalising on our cross-platform strategy as we continue to work together, building and deploying the most engaging games enjoyed by players across all channels. We are very encouraged by the trends and progress we are seeing at SciPlay. The team has done a great job capitalizing on the momentum. We'll continue investing in our game, players, and platform with industry-best live ops to optimize player experiences and maximize monetization opportunities. Moving on to iGaming, where we operate the leading open gaming system platform, connecting studios and operators to the best-in-class iGaming ecosystem, enabling grander scale and access to games and customers. 10 years of experience in iGaming has earned us a leadership position and a significant advantage in deploying regionalised game content. GGR on our platform continues to grow in the US, driven by an increased volume of LAN-based and digital native games, and the continued scaling of OGS through third-party studios. This quarter speaks volumes to the performance of our game titles as we maintained and grew our market share sequentially in all six US states that we are live in. In the EU and UK, we saw 7%, and 10% GGR growth, respectively, on a year-on-year basis, with performance primarily driven by both Elk and Lightning Box Game Studios. Across all regions, we continue to see impressive performance from our first-party content, with more upside expected from our 2-plus-1 roadmap featuring our most popular LAN-based titles and our 1-to-500 launches in the UK, innovating on our products to engage players while keeping responsible gaming at heart. Of the top 20 games in the US on our OGF, nearly 70% of those are Light & Wonder's proprietary content, emphasizing once again that players gravitate towards games that they are familiar with across all channels. Lightning Box reported a record quarter with GGR growth of 62% in the US, marking six consecutive quarters of sequential growth since joining the Light & Wonder family. Elk also saw a record quarter with GGR growth of 71%. This was the fifth sequential quarter of growth under Light & Wonder, driven by exceptional Q1 content launches, Pirates, Metropolis 4, and Tropical 2. Turning to Live Casino, the fastest-growing segment of the iGaming market. We're excited to announce we've solidified our launch partner in the US with Rush Street Interactive, and we're progressing towards final regulatory approval for a successful launch in Michigan this year. It's clear to us that Live and Wonder has a strategic advantage as the first mover in the iGaming space. We are seeing tremendous performance from our LAN-based original content and we've only scratched the surface of integrating these great games into our iGaming offering. In closing, we continue building off our strong business momentum established in 2022 with content, technology, and talent fueling our cross-platform strategy. Regarding talent, we are investing significantly in programs to attract, retain, and develop the best in the industry. In content, we are executing on a robust cross-platform agenda with our games reaching all corners of the globe. With technology, it bears repeating that an integrated product roadmap and streamlined game development process promote technology efficiency, reducing development time, cost, and other resources. This new approach is already producing results. Eight key game themes will be fully launched tri-channel throughout the year. Five digital native games will be making their debut in the land-based market, and 38 land-based titles will go into the digital ecosystem this year. These significant milestones further validate that proven games are in demand and players want to play their favorite games across multiple platforms. The integration of these market-leading assets and the insights we gain by having these three powerful businesses allow us to build the greatest franchises and games possible. At this point, I'd like to turn things over to Connie to summarize the financials.