Light & Wonder, Inc.

Hello, everyone, and welcome to the Light and Wonder 2023 Second 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. To register to ask a question, you'll need to press Start followed by 1 on your telephone keypad. I will now turn the call over to Nick Zangari, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to our second quarter 2023 earnings conference call. With me today are Matt Wilson, our president and CEO, Connie James, our CFO, and Oliver Chow, our incoming interim CFO, who will join us for a brief introduction. During today's call, we will discuss our second quarter 2023 results in operating performance, followed by a question and answer session. Today's call 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 and are consolidated statements of operations for comparable prior periods. 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 investor 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 continued our strong performance in the second quarter, closing out the first half of 2023 with outstanding results. I want to thank our talented teams across the globe for their tremendous focus and execution, which continues to fuel growth across all three lines of business. Our strategy and associated investments in the business are yielding results. As you can see, our performance in the second quarter validates the significant progress we are making. with consolidated revenue up 20% year-over-year to $731 million in the quarter, an amazing ninth consecutive quarter of year-over-year growth with each line of business growing double digits again this quarter. Gaming momentum continued with year-over-year growth across all four lines of business. SciPlay and iGaming both achieved record revenue in Avidar in the quarter, allowing us to close out the first half of the year with $1.4 billion of consolidated revenue and 18% growth rates compared to the prior period. In addition to the exceptional financial performance, I also want to mention a couple of other key milestones we achieved this quarter. I'm very excited to share that we successfully listed and began trading on the Australian Security Exchange, or ASX, in May. And we're also targeting ASX index inclusion as we expand our global exposure to attract more investors. Index inclusion has the same benefits as in the US markets, allowing broader placement of our company stock into investment portfolios. The interest from the investment community during our Australian management investor meetings in May far exceeded our expectations. In fact, there are probably some new Aussie investors on this call today, so welcome to the Light and Wonder family. We as a team wholeheartedly embrace the concept of continuous improvement, and our efforts on the CSR and ESG fronts are continuously evolving, both in terms of internal initiatives and external reporting. In this respect, I'm delighted that we recently published our inaugural CSR report, now available on our website. While I'm proud of our various awards, such as being named Employer of the Year in the SBC North American Awards, and taking home the Diverse and Inclusive Team of the Year Award in the Women in Gaming Diversity Award, our dedication to progress remains steadfast. Our commitment lies with the people we serve and the communities in which we operate, ensuring that responsible gaming remains one of the fundamental pillars of our business philosophy. I am also pleased to announce that we've entered into a definitive agreement to acquire the remaining 17% equity interest in Syplay that we do not currently own, with $22.95 per share in an all-cash transaction. Our combined balance sheets will provide us with the flexibility to optimise capital investments to develop and launch great games cross-channel, bringing our world-class teams together for seamless collaboration to innovate and grow as one, and ultimately fostering our winning culture as we deliver on our cross-platform strategy and enhance shareholder value. With a solid foundation and growing momentum, our business is performing remarkably. As we introduce a greater array of exceptional products to the market, I'm thrilled about the future and confident that our focus strategy will drive sustained success, a strategy which revolves around the release of great games across all three businesses. Now let's turn to the business highlights. We continue to build on our strong foundation in our gaming business, capitalising on new games and franchise extensions with new hardware and product capabilities. Our recent performance is a testament to our significant progress, with the COSMIC and Cascada slant cabinet launches driving momentum in the quarter. In gaming operations, we continue to grow our North American premium units for the 12th consecutive quarter, now representing a record 47% of our North American in-store base. The optimisation of our fleet and game performance is driving our increase in North American and international revenue per day as we solidify our position as a premium product supplier to our operator partners. We continue to see our games and franchises such as Ultimate Violent Cash Falls and Journey to Planet Moolah performing extremely well, and our new games are being met with great enthusiasm, including Monsters Frankenstein from Studio X, debuting as the number one wide-area progressive game on the ILS chart. Ted Harsey's Studio X is a great example of our R&D investments delivering success. To that extent, we'll see more great games and franchise extensions such as Double Dragon and Monsters Dracula coming out of Studio X, further bolstering our game-ups roadmap on the Cosmic. The Cosmic cabinet is scaling faster than two of our most popular cabinets, the J43 and Cascada Portrait combined, within the first two months of their initial launch. With respect to our dual screen and stepper slot offerings, both Cascada dual screen and Landmark 7000 held onto their number one spot on the iOS charts, backed up by top performing brands, Dufu Dukai and Blazing 7, with Lion Link and Quick Hit extensions expected to launch later this year. In game sales, where we continue to demonstrate strong product momentum, shipping over 9,100 units globally with quarterly revenue growth of 41% year on year, replacement sales was a highlight, with North American and international sales exceeding 2019 second quarter levels. In Australia, the breadth and depth of our portfolio enabled us to once again achieve over 20% market share for the second consecutive quarter, demonstrating our commitment to R&D investment, delivering sustainable growth in this important market, underpinned by key titles, Dragon Unleashed and Thunder Drums, as they continue to outperform. We're also very excited about the launch of Emma Charles Staff Studios first product, Dragon Train, later this month at AGE. Turning to systems, we continue to maintain our leadership position in the industry through innovation and enhanced capabilities. Recently, we've bolstered our cashless functionalities with partners, integrating our unified wallet as well as our table games cashless solution. With new regulatory developments and responsible gaming initiatives internationally, we are well positioned to capture these opportunities as they materialize. In fact, we see solid demand for our cashless enablement iView hardware as we continue to enhance our value proposition to operators through expanded solutions. Another example is our loyalty offering Engage, which just went live with a partner operator in Atlantic City, and we have several Engage installations scheduled for the remainder of the year. Our systems business is gaining renewed interest from our operator partners. We will continue to solidify our leadership position with several innovative initiatives, providing operators with a data-driven system solution, which further enhances player experience as LAN-based and online gaming converges. Lastly, in tables, we delivered a solid quarter with outside sales of our market-leading table game utilities products. Our proprietary table games offering continues to demonstrate brand excellence with the growing table games progressing in store base and increased vault subscribers. In fact, a large Australian casino operator recently signed on as our latest partner, given our strong product offering. Overall, we are very pleased with the rollout of our new products and their initial performance. The progress we see in the adjacent BLT markets is evidence of these investments we've made in R&D and the best is yet to come. We expect our robust product portfolio to carry this strong momentum throughout the remainder of the year. Moving on to side play where we continue to set new records, taking share and outgrowing the market with yet another outstanding quarter of 19% year-over-year growth on record revenue over $190 million. Jackpot Party, Quick Hit Slots and Goldfish Casino all achieved quarterly revenue records and outpaced the market in the quarter. Once again, solidifying Sideplay's competitive lead in the industry with carefully planned market penetration strategies and engaging content driven by a robust Sideplay engine. With Light and Wonder's library of proven content and our Sideplay engine driving monetization, we achieved another record average revenue per daily active user of $0.93 in the quarter. demonstrating the true power of brand loyalty across all of our channels. Once again, validating that our businesses are complementary and better together. In fact, the SidePlay engine is now deployed across all of our social casino games, enabling us to further enhance and personalise player experiences. To drive sustainable growth going forward, we're also making continued investments in areas such as data and analytics, plot development, ad tech, marketing innovation, our direct-to-consumer platform, and new games. We are very pleased with the trends and progress we see at Sideplay. The team has done an exceptional job investing prudently and improving returns on user acquisition. We are just scratching the surface on our full potential and have more runway to optimise player experiences and maximise growth opportunities. The strong Sideplay results demonstrate the investment benefits we've made in the business, as well as the team's strong executions. This seamless collaboration with SciPlay over the years is truly reflected in this quarter's performance. Turning to iGaming, where our leadership position and experience in the industry propelled us to record top and bottom line performance in the quarter, with 17% year-over-year growth on record revenue of $70 million. Our industry-leading OGS platform saw record GGR in the quarter, with growth across all regions, led by the increased volume of our original LAN-based and digital-native games. US GGR and OGS was up 25% year-over-year, led by our evergreen Ultimate Firelink and 88 Fortune franchises, as well as expansion of our third-party network. Over 70% of the top 20 games in the US on the OGS are light and wonder proprietary content, as players continue to show their affection for our game. Internationally, Canada OGS GGR grew for the seventh consecutive quarter, as Ontario was up 84% year-over-year. In the EU and UK, OGS GGR was up 14% on the strong launch of Monopoly Money Grab and performances of Pirate, Metropolis 4 and Rabbit Royale. We also entered the Switzerland market in the quarter, another step in expanding the Light & Wonder global footprint. The scale of our content aggregation platform continues to drive record revenue at Elk Studios with growth of 86%, achieving its fifth sequential quarter of growth since our acquisition of the business. Lightning Box also grew 39% year over year and outpaced US market growth by approximately 1.7 times in the quarter. Additionally, we have exciting developments with PlayZero launching in Canada in the quarter and now provisionally licensed in Michigan. Our live casino offering is also entering soft launch stage in Michigan and we recently added a new operator partner in Sky Betting and Gaming in the UK with our first ever live game show. The recent legalisation of iGaming in Rhode Island is another important step for the industry. Light & Wonder is strategically positioned at the forefront of the market with a leading iGaming ecosystem and a full suite of product offerings ready to capitalise on opportunities as they arrive. We've talked about our three businesses and how they're performing. With our scale and investments in R&D, we'll be able to take advantage of new growth opportunities across platforms. unlocking the full power of our R&D through enhanced collaboration in research and increased game development efficiency through A-B testing. With our announced agreement with SciPlay, the teams will be working even more closely together, further fueling our cross-platform strategy, driving high hit rates for our games with our industry-leading expertise and platforms. The investments we're making follow a methodical approach to ensure that each dollar spent will contribute not only to enhanced performance but also to an engaging game experience for our players. Additionally, we've made significant progress in bringing our cross-platform vision to life, launching more content across our three businesses than ever before in the company's history. We're excited to showcase our innovative products and robust portfolio at the upcoming AGE and G2E Expos. One of the highly anticipated games is Dragon Train, which is prime for the Australian market, and we are already hearing great feedback from operators. We also have other surprises in store for the upcoming expos, and I'm looking forward to seeing many of you there. Light and Wonder is riding incredible momentum, driven by a clear roadmap and a harmonized strategy designed for sustainable growth. Our industry continues to demonstrate resilience based on operator sentiment. That said, we will always take a prudent approach to managing our business with a healthy balance sheet and a diverse portfolio backed by a robust R&D engine. Before I hand the call over to Connie to discuss our financial results, I'd like to thank her personally for her contributions to the company and for providing the leadership required to help us flawlessly execute our recent transformation. I've worked with Connie for a good part of my career, and I can tell you her dedication is second to none. She has been an important part of the success here at Light and Wonder, and I will truly miss her and what she brings to the table. At the same time, we're in capable hands with our interim CFO, Oliver Chow, backed by a strong finance leadership team, many of whom she's mentored over the years. This provides us stability and a seamless transition as we continue to march towards our 2025 1.4 billion AIDIBDAR target. Now I'll turn things over to Connie.