Light & Wonder, Inc.

Welcome to the Light and Wonder second quarter 2024 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 queue for a question, you can do so by pressing star 1 on your telephone keypad. I'll now turn the call over to Nick Zangari, Senior Vice President of Investor Relations.

Thank you, operator, and welcome everyone to our second quarter 2024 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 second quarter results and 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 located in the Investors section of our website. 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.

Thanks, Nick. Hello, everyone, and thanks for joining the call. First and foremost, I would like to commend the team on the exceptional results in the quarter and throughout the first half of the year. Our continued double-digit consolidated revenue and EBITDA growth keeps us well on track towards our 2025 targets. Momentum remains strong with the industry demonstrating continued stability coming out of 2023, where we saw record gross gaming revenues in the US. In fact, Light and Wonder's scale and leadership position across our businesses enabled us to capitalize on a range of growth opportunities. We are well positioned with our global presence, extensive library of proven game franchises, diversified casino product portfolio, and unique cross-platform strategy to execute on future prospects in both land-based and digital spectrums. In addition to our strong operational and financial execution, I'd also like to highlight a couple of other noteworthy achievements. In June, we completed the company's first ever share repurchase program in just a little over two years and authorised a new three-year $1 billion buyback program as we continue to see tremendous value in light and wonder. Our CSR and ESG efforts are also progressing as we continue to execute on the diverse set of initiatives that were highlighted in our recently published CSR report. The all-around effort we are seeing across the organization is a true testament to the culture and people driving our success. Additionally, we have a clear strategy underpinned by a robust product roadmap, which will further fuel our growth. With that, let's look at the operational highlights. In gaming, we continue to see strong momentum and solid execution on our commercial strategy. Our performance reflects the power of the portfolio, where franchise success can be replicated and leveraged across markets and business models. To put this in perspective, our North American premium install base has grown for 16 consecutive quarters, and now is at approximately 50% of our total North American install base. We added over 1,000 units sequentially in North America on the back of our evergreen franchises, with revenue per day surpassing the $50 mark. Our Dancing Drums, Ultimate Firelink, Journey to Planet Moolah, Dragon Train, and Monsters franchises remain strong performers, providing a solid foundation to our fleet. We anticipate a cadence rollout in the second half with titles such as Squid Game, which we've recently launched, and Huff & Puff Money Mansion, a game extension of our highly successful for sale franchise that's been introduced under the lease model to drive growth beyond 2024. Given the timing of new title launches, we saw record North American install base additions in the second quarter. Going forward, we expect continued elevated unit growth in the second half of the year, but at a more measured pace relative to the second quarter additions. On the game sales side, we saw continued momentum in both North America and international, with over 11,300 units shipped in the quarter globally. In addition to our North American core replacements, we also capitalised on adjacent market growth opportunities in the quarter. In fact, the performance of our games was so well received that Oregon Lottery followed up with a second order of 1,200 units less than a year after the initial shipment, reflecting our strength and continued progress in the video lottery market. Additionally, we've made significant progress in the coin-operated amusement machine and historical horse racing markets, both of which are growing opportunities for us as we deploy more engaging game content across the board. The strength of our game content is on display, with Light and Wonder taking three of the top five top indexing core games in the latest artist report. Puff and even more Puff retained the number one spot, again with even more units on the floor, and our quick hit games rounded out the top rankings on the charts. Pleasingly, our ship share in Australia was once again number one in the quarter, and we look to extend this momentum through new games and extensions such as Shenlong Unleashed and Jewel of the Dragon. Our strong international presence is also reflected in the continued sales in Macau and the UK, where we have a longstanding partnership with Entain. These are all examples of the benefit of our global reach and diverse end markets, fueling continued momentum in game sales. In the systems business, we continue to drive progress through product capabilities enhancements, which has led to contract wins as well as hardware replacement opportunities. As a leading global systems provider, we will continue to innovate and integrate our software and hardware to provide operators with best-in-class solutions to run their operations efficiently. We continue to see stability in our core tables business, and we are currently working on several initiatives which will elevate our product offerings in the future. Our diversified gaming portfolio is providing growing revenue streams, to fuel investment in the business, supported by sustained momentum as evidenced by our continued expansion in key markets. Our performance reflects a true inflection point, and we expect to build on this momentum as we continue to expand and build out our studios and franchises. On to Siteplay, where once again our team executed seamlessly on its growth and margin initiatives, delivering over $200 million in quarterly revenue for the third consecutive period. We've outpaced the social casino market for 10 consecutive quarters, with now 11% market share driven by our operational prowess to grow games and prudent approach to user acquisition. Our philosophy here remains the same. We will be diligent and smart with UA spend, focusing on returns, and we'll look at incremental campaigns and other opportunities as they arise. Additionally, the SitePlay engine will continue to do what it does best, optimise player engagement to enhance the player experience. backed by our library of proven franchises and games. We've consistently delivered a product offering that improves monetization as we've seen in our performance. In fact, we continue to see record monetization numbers in average monthly revenue per paying user and average revenue per daily active user. Both metrics grew double digits compared to the prior year period as we continue on the trajectory of sustainable monetization growth. Notably, we're also seeing solid omnichannel progress with the successful launch of franchises such as Huff & Puff globally. The cross-platform exposure from our coveted franchises and games enables cost-effective player acquisition, allowing further flexibility to execute on our expansion initiatives. Meanwhile, our direct-to-consumer platform is progressing nicely, as revenue generated this quarter is now approximately 12% of Sideplay's total revenue. As I've mentioned previously, we have a deliberate strategy with the rollout. and we are pleased with the progress here as we wrap up our initial phase of the program. The user feedback we received was instrumental in the development of the platform, and we will continue to prudently expand this offering to a broader base of players in phases and scale at an appropriate pace for customer engagement as part of our long-term initiative. While we've made significant strides on the rollout this year, we would expect a more limited growth in DTC as the percentage of revenue in the back half of the year, given the cadence of our rollout across games. The success at SidePlay has been phenomenal, and we continue to execute on our user acquisition, engagement and monetisation blueprint, while planning for new games and driving learnings for our expansion in ad tech. Turning to iGaming, where we continue to see healthy growth across all US states and scaling of our content on our open gaming system platform, driving uplift compared to the prior year period. The OGS platform continues to deliver record gross gaming revenue volumes in the US and Canada, as we saw year-over-year increases of 25% in both regions. In the more mature UK and EU markets, we've worked hand-in-hand with our partners and navigated changing dynamics in the market well, demonstrating our adaptability and strength of our regionalised market-attuned content. Importantly, our experience and first-mover advantage in the industry continues to differentiate our products as we build and expand our offerings, such as enhanced marketing capabilities to improve player engagement, and experience for operators. As previously noted, the scale of OGS is second to none. We now have over 85 partner studios and 570 operator brands plugged into OGS and continue to extend our reach into all legalized jurisdictions with our two-sided network making the best games available to players. Lightning Box, Elk, PlayZito, and our live casino offering are just some of the examples where we are expanding the network and our product portfolio for all parties in the iGaming space. While plug-and-play studios such as Lightning Box and Elk are more readily available to scale for immediate success, we're equally excited about the long-term prospects of PlayZito, which is now live in three major US iGaming states, and Live Casino, where we continue to expand our partnerships as we go live with Penn in the back half of the year. We are confident the investments into our iGaming portfolio will ultimately bear fruit with the support of our team's focused execution. We will continue to leverage our leadership position and expand our robust portfolio to capitalize on the opportunities that the fastest growing gaming sector presents us. As we move past the halfway mark of 2024, I am more confident than ever in the team's execution to plan and product roadmap. Our cross-platform strategy fully accentuates the power of our portfolio as we continue to see our brands and franchise expand across land-based, social, and iGaming channels. Notably, we are in an enviable position with our global presence and scale, which is key to sustainability in the industry. We will continue to focus on R&D investment and innovation to elevate the overall gaming experience, which will ultimately translate into growing market share. As many of you have heard me say before, although our outstanding team continues to deliver quarter after quarter, we are still in the early stages of growth across our business, and the best at Light & Wonder is yet to come. With that, I'll turn it over to all of us to review our quarterly financial results.