Light & Wonder, Inc.

Hello all and thank you for your patience. Today's call will begin in approximately two minutes time. Hello all and welcome to the Light and Wonder 2023 Fourth 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. If you'd like to ask a question, please press star followed by one on your telephone keypad. I'll 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 the fourth quarter and full year 2023 earnings conference call. With me today are Matt Wilson, our president and CEO, and Oliver Chow, our CFO. During today's call, we will discuss our fourth quarter and full year 2023 results and operating performance, followed by a question and answer session. Today's call will contain certain 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 of 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 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 material 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, everyone, for joining today's call. Our fourth quarter performance capped off a banner year for Light and Wonder as we continue to build upon our strong business and financial foundation. Notably, we have consistently delivered on our key performance objectives since we announced the company's transformation strategy. Our numbers reflect strong execution and contingent momentum with consolidated revenue up 13% over the fourth quarter of last year, marking 11 consecutive quarters of year-over-year growth. We once again delivered double digit growth across the board as evidenced by our results throughout the year and have now achieved five consecutive quarters of double digit revenue growth in all three businesses. As a result, we ended the year with a 16% increase in consolidated revenue, reaching a record $2.9 billion for 2023. Looking back, I would like to share with you what defined Light and Wonder and drove our success this past year. We have an exceptional team and experienced leadership with a winning mentality. I firmly believe that we have the best in class talent executing on a proven playbook, and I commend our entire team for an outstanding quarter and an outstanding year. Throughout 2023, we made strategic investments in the aspects of our business that we expect to drive long-term sustainable value, something we were not able to do before the transformation. Our improved financial position and disciplined capital allocation strategy support our ability to continue to invest in the future of Light and Wonder. with a commitment to accelerating R&D investments and enhancing our product offering. We have a differentiated product strategy and demonstrated sound execution on our growth pillars, with refreshed hardware and content for both core and adjacent markets. We achieved impressive share gains in key markets, with the popular franchise Dragon Train continuing to drive our growth in Australia and creating notable operator engagement around our pending release in North America. We also made considerable progress in adjacencies, and we expect to be active in video lottery terminal markets, notably Oregon and Quebec, where we've recently announced deals, as well as the coin-operated amusement machine market and historical horse racing markets in 2024. Capitalising on franchise extensions has been another key differentiator in driving our success. We have shifted our focus from allocating the majority of our resources to new niche markets coming online to now building on our evergreen franchises and game extensions. which can be leveraged across our entire ecosystem. In our digital businesses, SciPlay had another record quarter with continued market share momentum and higher revenue in the social casino space, which we will discuss in further detail. Our iGaming business segment continued to be a growth driver for Light & Wonder, with a strong quarter reflecting continued momentum in both the US and international markets. These results demonstrate the benefit of our robust R&D strategies. driving improved game performance with impressive returns on our investments. We continue to see iGaming as a compelling opportunity as this market continues to develop over the coming years. To lighten the wonder, it truly is all about the game. Throughout the past year, we executed on our product strategy to build exciting, industry-leading games that have continued to drive our impressive performance metrics. In addition, we are pleased with our continued progress on our cross-platform strategy, with development efficiencies being realised and content expansion across all channels driving digital revenue uplift. We are very pleased with our considerable progress across our business units as we continue to capitalise on the opportunities in a resilient gaming industry. I will now turn to our business unit operational highlights. Gaming continues to be a strong driver for Light and Wonder. Our investments are bearing fruit as we deliver on strong top line growth, up 13% for the quarter and 16% for the full year. We saw continued momentum in gaming operations, ending the year with an increase of 590 units or 2% growth in our North American in-store base year over year. These results were largely driven by premium units, which continued to increase for 14 consecutive quarters. The performance of our games is on full display, with both North America and international revenue per day exceeding 2022 levels in the quarter and for the year. This is a testament to our strategy, focusing on fleet optimisation and ensuring the games we develop are casino floor mainstays, maximising the full value of each and every unit we deploy onto the casino floors. We will continue to build on our evergreen franchise extensions, such as Ultimate Violink, Huff & Puff, Dancing Drum, and recently Dragon Train, which was the biggest Australian launch in the company's history. Our licensed titles, such as Top Performing Monsters and Highly Anticipated Squid Game, featured on our highly successful Cosmic and new large screen Jumbo Horizon cabinets, are expected to extend our momentum heading into 2024, providing immersive and seamless player experiences. In game sales, Our strategy was validated by an outstanding performance with over 37,000 units shipped globally for the year, a company record, and an increase of 40% compared to the prior year. Our progress in both North America and Australia is evident as we continue to maintain over 20% market share in both markets with exceptional growth in the replacement segment year over year. We expect continued growth with our Cascada series cabinets, notably the Cascada dual screen which was named top performing new premium cabinet at Island and the driver of our announced deal into Oregon and more recently Lotto Quebec. Moving on to systems, highlights for 2023 included key contract wins driven by our product portfolio with enhanced capabilities such as loyalty features, giving operators access to greater insight on player preferences. Our recent systems deal announcement with Harry Reid International Airport and Mohican Inspire Entertainment Resort in Korea fully demonstrates why we are the preferred choice for operators, providing an intuitive, curated customer journey at every touchpoint, regardless of location, vertical or platform. Our engaged product continues to gain traction as we focus on software services in addition to our in-demand hardware. We're excited by the offerings that we highlighted at the Global Gaming Expo, such as Cashless, which is currently gaining traction, including in Australia, as we participate in trials in New South Wales for responsible gaming initiatives. We expect Light and Wonder to maintain its leadership position in this space through innovation and partnership with our operator customers to bring the most comprehensive portfolios to the market. On to tables. We continue to be an industry leader known for best-in-class products and an extensive library of IP. The recovery in the global markets help drive higher sales with table product revenue up 13%. Overall, we expect to expand on our recurring revenue stream and target long-term growth through product innovation and hardware investment, where we have a proven track record of success. To sum it up, I'm very pleased with our performance in gaming. Light & Wonder is still in the early innings of growth in this sector. Importantly, we are well positioned in every product category with our premium offerings and a focused strategy to capitalise on new opportunities across this important segment. Now turning to Sideplay, we continue to be pleased with our performance in the social casino space. SciPlay is now a fully integrated part of our portfolio, executing beyond expectations in a breakout year. First, I'd like to share that the integration has gone well. We are executing on our cross-platform strategy through a more harmonized development process across all businesses. Last year, I highlighted our key growth objectives for SciPlay, outpacing the social casino market, scaling average revenue per daily active user, and investing in both our SciPlay engine and product roadmaps. I'm very pleased that we have delivered on these objectives, reflecting both strong leadership and consistent execution. We outpaced the market again, now for eight consecutive quarters, and have consistently gained share over the course of the year. So I played for revenue 12% in the quarter and 16% for the year, both record levels. Our four largest games, Jackpot Party, Quick Hit Slots, Goldfish Casino and 88 Fortunes, posted quarterly record revenues. a testament to the success of our CyPlay engine as we continue to enhance our portfolio of games through our LiveOps strategy. Our recent Dancing Drums app launch was also a success as we continue to expand our LAN-based titles on our social platform. Average monthly revenue per paying user was approximately $114, and average revenue per daily active user increased 15% year-over-year to $1, both record levels in the quarter. We will continue to invest in our capabilities and product roadmap to drive engagement and loyalty, while continuing to grow monetisation sustainably and responsibly, particularly in our core franchises. Entering the new year, we are focused on developing our direct-to-consumer platform, which we expect will enhance player relationships and engagement, accelerate the potential to expand margins over the long term, and grow lifetime player values. Clearly, SidePlay continues to be a valuable growth driver for Light and Wonder and a big part of our overall strategy. Going forward, we look to extend our industry-leading social casino growth as we further differentiate our offerings from those of our peers. Now looking at iGames, our portfolio expansion enables us to be one of the largest content providers in the industry, and we continue to see tremendous demand from operators and from players. Quarterly revenue increased 13% year-over-year to a record $70 million, with full-year revenue also a record, reflecting the continued growth momentum in the US and international markets. The growth is a testament to our best-in-class content aggregation platform and unmatched first-party content. The quarter was highlighted by record launches with Pyrox2 and Ultimate File in Cash Falls, China Street, further demonstrating our content development roadmap and our cross-platform approach. Of the top 20 games on the OGS across the US, our first-party content accounts for over two-thirds of the total, driven by LAN-based titles, table games, and Lightning Box. In addition, Elk, Lightning Box, and Playzito all continue to scale with record GGR in the quarter. We are collaborating closely with operators on our live casino offerings. which went live in the quarter in Michigan with Rush Street, Golden Nugget and DraftKings. The initial feedback has been very positive with teams working together on both sides as we continue to enhance our product with additional functionality. Importantly, other operators have taken note of our collaborative partnerships and I'm pleased to announce we signed an agreement with Penn Entertainment for Michigan, which will include network and bespoke tables. While we are still in early stages, we are already in discussions with customers on expansion opportunities into other regions. Over the long term, we expect this to be a growth driver for our iGaming business. The US is a fast-growing market, and we will continue to drive our key initiatives, which are to execute on the launch of two Epic LAN-based titles plus one digital native title monthly, expand jackpots, steppers and table game offerings with our IP and scale. and accelerate Elk Studios launches and game services such as marketing jackpots and multiplayer features, all while focusing on game placement and promotion. As we look to 2024, we expect to extend our momentum through our regionalised roadmap and original content that have already brought us great success to date, as well as further expansion into new markets We are encouraged by the legislative progress in Brazil, confirming our optimism for the future of iGaming legislation as a growth driver for Light and Wonder. Our portfolio expansion and legalisation will drive future growth, and our impressive scale, robust product offering and well-established footprint globally positions us well to execute when opportunities arise. We are very proud of our accomplishments in 2023 as we executed on a number of key strategic initiatives. Our successful secondary listing on the Australian Securities Exchange, or ASX, further expanded our global presence in May. Subsequently, we were added to the ASX 200 index last October. This inclusion enables light and wondrous exposure to a broader base of investors, further solidifying our position in the Australian capital market. Notably, feedback to date from the Australian investor community continues to exceed our expectations. As we previously mentioned, we closed the site by acquisition in October as well, with integration completed successfully and collaboration on our cross-platform opportunity accelerating. Finally, we continue to strategically increase our investment in the business and return capital to shareholders, all while improving our cash conversion and further reducing leverage. I'm also pleased to report that Light and Wonder's strong performance did not go unnoticed as we garnered several distinguished industry awards this past year. As a testament to the success of our cross-platform strategy, we were named as the Multi-Channel Supplier of the Year at the International Gaming Awards. We were also named Full Service Platform Provider of the Year at the EGR North American Awards, fully demonstrating the power of our well-routed portfolio. Our business unit leadership and teams all received accolades at the SBC Awards in North America. Notably, SidePlay was named Social Casino Operator of the Year on the back of a banner year. Our momentum internationally was also recognised as we were named Casino Supplier of the Year at the Global Gaming Awards in Asia and most recently at ICE in London as well. Additionally, we were acknowledged for our CSR and ESG efforts by being named a Diverse and Inclusive Team at the Women in Gaming Diversity Awards. As part of our recent transformation, we have also strengthened our commitment to be a positive influence on the industry, driving key social initiatives that are core to our values. Our primary focus on responsible gaming as an industry leader drives us to create products and services that can be enjoyed responsibly across the globe, as evidenced with our cashless collaboration with peers and regulatory organisations in Australia. Responsibility starts with us, and we will continue to educate our employees on awareness of responsible gaming policies and practices. Our corporate and social responsibility programs, as well as our environmental, social and governance efforts, will continue to be a top priority for Light and Wonder. To sum it up, we expect continued execution of our strategy in 2024. The results we delivered in 2023, along with our ability to attract best-in-class talent, established market positions, and strong cross-platform capabilities, put us on a clear path to achieve our long-range targets. Our teams have done a tremendous job, and Light and Wonder is shining brighter than ever. We are ready to deliver on the promise of sustainable growth as we continue to be the leading cross-platform global games company. As you know, in December of last year, Oliver Chow was officially named the company's executive vice president and CFO. I am delighted to officially welcome Oliver to our senior leadership team. He has already played a pivotal role in driving the success of the transformation, and I'm confident that we'll benefit from his expertise and financial guidance as we continue to execute on our strategy. And with that, I'll turn it over to Oliver.