Light & Wonder, Inc.

good day and thank you for standing by welcome to light and wonder first quarter 2026 earnings webcast and conference call at this time all participants are in a listen only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you will need to press star one and one on your telephone you'll then hear an automated message advising your hand is raised to withdraw your question please press star 1 and 1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Rowan Gallagher, EVP of Corporate Affairs. Please go ahead, sir.

Thank you, operator, and welcome everyone to our first quarter 2026 earnings conference call. Joining me today in Sydney are Matt Wilson, our President and CEO, and Oliver Chow, our CFO. During today's call, we will discuss our first quarter results and operating performance where we will refer to our earnings presentation. This will then be 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 in the Investors section of our website and our filings with the SEC and the ASX. We'll 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 and earnings presentation located in the investor section of our website. With that, I'll now turn the call over to Matt to discuss the first quarter results and operational highlights on slide three. Thanks, Matt.

Thanks, Rowan. Hello, everyone. Thank you for joining the call today. Light and Wonder has proven to be adaptive and nimble, capitalising on new opportunities through our cross-platform strategies. Importantly, we understand or remain focused on what fundamentally drives value in our business, and that is gain performance. The evidence is clear. We continue to progress and execute at a high level based on internal and industry data we are seeing. Over the past several months, we have faced a number of external headwinds, including tariff pressures and, more recently, geopolitical and macroeconomic uncertainty affecting end consumers. These are factors largely outside of our control, and we've managed through them with discipline. Despite some softness in the numbers, a more cautious consumer sentiment, uptick in inflation and the tariff impact, we were able to keep our margins steady and still expect a stronger back half performance. To summarise our results for the quarter, consolidated revenue and consolidated EBITDA both grew year over year and margins expanded across every business segment. The combination of top line growth, margin expansion and improving revenue quality is the financial profile we are building towards. Our recurring revenue, which represented 73% of total consolidated revenue, grew 13% year over year, reinforcing the quality of our earnings base. North American installed base, excluding Grover, added over 2,550 premium units year over year, underscoring the continued momentum in gaming operations. Our unwavering commitment to cash enhancement, and value remains with adjusted free cash flow of $207 million in the quarter, up 86% year-over-year, demonstrating the cash-generated power of our business as it scales. EPSA, or adjusted earnings per share, grew 7% to $1.45, reflecting continued cost discipline and the benefit of our ongoing share repurchase program. Across the enterprise, our business continues to benefit from a balanced mix of land and digital-based solutions. reflecting the strength and diversity of Light and Wonder's business model, high margin, cash generative, and omnichannel. Turning to slide four for a high-level view of our consolidated results, you can see a business that is growing and generating more of its revenue from high-quality, flow-through businesses. Gaming and iGaming drove the top-line growth this quarter, underpinned by the strength of our content engine and continued operational momentum. EBITDA margins expanded across every single business segment year over year. This reflects the executional prowess and disciplined focus on efficiency we have embedded across the organisation. Additionally, Grover is also contributing as a high-margin recurring revenue stream within the gaming segment of our portfolio, which will improve over time as we continue to integrate and ramp up the charitable gaming business. The results we delivered reflect an omni-channel business with a strong structural moat. a content and R&D engine that continues to compound, and an increasingly recurring revenue base. Those are the characteristics of a business built for durable long-term growth. Last quarter, we introduced a dashboard to present an annual update on the path towards our long-term targets. We received overwhelmingly positive feedback on our transparency in assessing the health of the business and therefore are providing this assessment you see here on slide five for a quarterly status check on the business. As you can see, green reflects strong execution and performance on track or exceeding what we've guided to. Yellow indicates solid progress but a potential watch point, and red flagging areas where we are being transparent about a gap and have a clear plan to address it. Additionally, we split the metrics up into grey and green highlighted sections, with the grey performance metrics highlighting the building blocks we've directionally guided to for our 2028 goals. The two new green rows introduced here are what we deemed essential to monitor this quarter. North American revenue per day, a metric that is critical in overall game performance and broader macroeconomic environment, continues to trend positively, evidence that the significant investments and commitment we've made in developing our games and franchises are bearing fruit. Candidly, we're also flagging that Syplay and the social casino industry are seeing some softness, and some of the metrics are not where we need them to be. However, we are seeing a modest improvement in our daily active users sequentially, which is a positive sign in the initial stage of stabilisation with players returning to our platform. The team is hopeful that this will trend positively as we continue to invest in this important part of our cross-platform engine. Overall, most of this scorecard shows positive results. We recognise that there is still room for improvement across the organisation and our teams are working collectively to address them diligently and effectively with well-defined plans. This is the kind of business we are building, one that executes with discipline, communicates with clarity, and stays focused on the long-term targets we have set. I will now go into the highlights and details of each of the businesses for the quarter. Turning to gaming on slide seven. The results reflect the quality and diversity of what we've built with our R&D engines. Revenue grew 3% to $512 million, and EBITDA increased 7% to $271 million year-over-year, with margins up 200 basis points to 53%. The margin expansion also reflects a richer revenue mix towards recurring revenue units in the absence of Grover in the prior period. Gaming operations grew 38% year-over-year, driven by continued premium install-based expansion on improved game performance within the portfolio, as we continue to see strong coin intrends 43 million of contribution from Grover. Tables grew 24% with strong utility sales in North America and solid product sales across EMEA and Asia. I'm pleased with the progress we've made here with our revamped product roadmap and commercial strategy. We are well positioned to capture the global opportunities that will be available to us in this space. Gaming machine sales were down 25% and gaming systems declined 14%. These are largely timing and not demand driven with the seasonal sequential volume reset. that follows a strong fourth quarter, underscoring the quality and durability of this business. Our pipeline is healthy, and we expect both to normalize as we move through the year into the second half when we ramp up the product launches. Pleasingly, we secured a number of systems contract wins recently, both in competitive replacements and long-term renewals across tribal, commercial, and state-regulated gaming operators, a true testament to our expanded suite of capabilities and offerings driving the systems business. Let's now turn to KPIs on slide eight. Gaming continues to build on a strong recurring revenue foundation with our North American install base up 41% year over year to 48,600 units at quarter end. This also reflects 12,200 Grover units added to the footprint. Importantly, premium units have increased for 23 consecutive quarters and is now 56% of the total North American install base with over 2,550 net ads year over year. It's worth noting that an operator-specific VLT to Class III conversion affected our non-premium unit count this quarter. Adjusting for that conversion, our premium install base grew in excess of the 500-unit quarterly growth we had previously guarded. Our blended average daily revenue per unit in North America grew 3% to over $48, inclusive of over units driven by strong wide-area progressive performance and coin-in against a backdrop of continued strength in industry-wide gross gain in revenues. Excluding Grover, North American store-based revenue per day was up 8% year over year, a meaningful indicator of the underlying business momentum. This is further reflected in our presence across multiple categories on the ILS WAP and premium lease charts, with franchises such as Ultimate Firelink, Huff & Puff, Dancing Drums, among others continuing to perform well. Globally, we shipped 7,200 of game sales units in the quarter. We continue to see strong momentum from non-adjacency replacements in North America. with solid performance from our piggy banking break-in and super hot flaming pot franchises. International sales were lower year over year due to the timing of shipments and hardware cycle in Australia, as well as new and expansion units in the Philippines in the prior year. Our international pipeline remains robust and we expect growth in this segment as orders are fulfilled later in the year with the launch of the Cosmic Dual Screen Cabinet in late Q2 and the regionalised roadmaps tailored for each of these regions. Average selling price held essentially flat at approximately $19,700, reflecting the pricing discipline and premium positioning of our portfolio. Looking ahead, we believe the setup for the second half unit sales is compelling. A strong content calendar, hardware refreshes that the market has been anticipating, and a global pipeline, we have high confidence in converting. Moving on to slide nine for an update on Grover. What you see here is an acquisition that is performing and benefiting from the established infrastructure we have here at Light and Wonder. Grover delivered $43 million in revenue for the quarter, driven by strong performance across existing markets and our entry into Indiana. We ended the quarter with over 12,200 units installed, up 660 units sequentially. We have added over 1,200 units to the Grover install base since we closed the deal in the second quarter last year. That growth rate directly reflects demand for this product and the strength of Grover's local market relationships with the charities and end customers. Indiana is exciting and a market that's still in its early innings. Encouragingly, we saw unit economic scale and improve progressively throughout the quarter, similar to our prior experience entering new markets. Our strategy here is clear. We adopt an effective and prudent commercial approach by pricing our business reflective of our game content and customer service value points of differentiation. Historically, that has served us well, as we've progressively grown the market and share over time across established markets. From an integration standpoint, we remain focused on deepening the alignment of L&W content, hardware, and brands within Grover. Our first light and wonder title, Eureka Treasure Train, was launched in Indiana, with exceptional early results supported by strong player engagement across all denomination play, reflecting the broad appeal across our player base. We expect to bring a steady flow of light and wonder hardware and content to the market throughout the remainder of 2026. Content integration is at the core of our value creation thesis for this acquisition, bringing our world-class game development capability to a recurring revenue platform with exceptional unit economics. Looking at the map on this slide, you can see the growth opportunity in front of us. Minnesota and Maryland remain priorities, and we are actively engaged in both. New Mexico is also a market that we are assessing while Alaska presents as an attractive opportunity pending legislation. The combination of Light and Wonder's content strength and Grover's operational reach creates a compelling growth platform, one that evolves our charitable gaming businesses into a single, unified content and hardware ecosystem with significant potential across both current and future markets. Turning to SidePlay on slide 10, we continue to see the social casino market under pressure in the quarter, with preliminary industry estimates indicating a mid-single-digit year-over-year decline as reflected in Sideplay's lower revenue. Despite the softness, we delivered growth in the direct-to-consumer platform, posting a record $50 million and a 27% of Sideplay's revenue, up from 13% in the first quarter of last year. The diversity of our portfolio was also evident across several titles. Quick Hit and 88 Fortunes both grew year-over-year, and Monopoly achieved its sixth consecutive quarter of revenue growth. The sustained performance of these franchises reflects the quality of our LiveOps engine and the depth of our meta capabilities across Sideplay. As for Jackpot Party, we are seeing the engagement improvements that we've been working towards. Play rates are tracking above the prior year, and importantly, our daily active users have stabilised and grew modestly quarter over quarter. The trajectory is moving in the right direction, giving us the confidence to lean back into UA investments as we move through the year. Engagement and monetization across the portfolio remain key focuses. We saw sequential growth in monthly paying users, driven by the new game economies we have deployed and targeted marketing investment. An average monthly revenue per paying user grew 8% year over year to $126. Going forward, we remain committed to the initiatives that will return SidePlay to revenue growth, including launching new game features such as SideBets and MetaQuest, which are expected to further improve our monetization flywheel. Now onto slide 11, where we delivered another strong quarter of revenue in Aibada growth in iGaming, extending double-digit momentum across the segment. Revenue grew 18% year-over-year to $91 million, and Aibada grew 22% to $33 million. with margins expanding year-over-year to 36%. These results were driven by the proliferation of first-party content across our platform and the ongoing expansion of our partner network. Wages processed on our content aggregation platform, OGS, grew 19% year-over-year to a record $29.9 billion. This quarter also marked the fifth sequential period of global first-party content GGR growth on OGS. First-party growth was led by the Huff & Puff and Pirate series, with Huff and lots of Puff ranking first and Pirates 4 ranking second globally. Additionally, eight of the top 10 games across our network in the quarter were first-party titles, reflecting the durability of our franchise strategy and the strength of our omni-channel approach to content deployment. Third-party content growth was driven by Canada expansion, new market entries, and continued momentum in Europe. The reliability and scale of our platform remains central to that growth. enabling us to connect an expanding network of studios to operators across the markets. You can see on slide 12 that iGaming presents a compelling story with key growth opportunities as jurisdictions open up. The upcoming Alberta commercial launch represents a key expansion milestone, and Elk Studios is on track to receive licensing in Pennsylvania with launch expected in the back half of the year. We're also encouraged by Elk's strong early performance in South Africa, which reinforces our confidence in the new market entries. New market development remains a strategic priority, with continued focus on South Africa, Brazil, and the Philippines as we solidify our footing in the regions. On the content side, first-party momentum continues to build. The success of our Huff & Puff and Pirates franchises provides a strong foundation. and we have a robust slate of franchise extensions and new games including titles from our Wizard of Oz, Wonka and Big Hot Flaming Pops series slated for launch this quarter. The roadmap you've seen here reflects the breadth of the content pipeline across both our North American and European markets. Looking ahead, I'd like to note the recently enacted UK tax change will begin to pressure our growth trajectory starting in the second quarter and is expected to continue through the end of the year. We are actively managing through this with operators and we believe new market opportunities will offset that pressure over time. Overall, we remain confident in our iGaming roadmap and the long-term growth potential this segment represents for the business. Before I hand to Oliver, I'd like to turn your attention to some of the slides we provided in the appendix. The gaming industry continues to demonstrate resilience, growing at mid-single-digit CAGR over the past two decades, despite macro events. We continue to see strong GGR this quarter amid geopolitical uncertainty, and we are well positioned to capitalize on opportunities with a robust global roadmap. Additionally, the progression of our financial profile reflects the kind of recurring revenue business earnings base we are intentionally building, which is further accentuated through our buybacks, delivering significant value to shareholders. Importantly, we are staying ahead of the trends. working through our AI enablement program across technology, content and business operations. Our IP, data, regulatory approvals, customer relationships and proprietary platforms gives us a structural note that I believe is genuinely difficult to replicate. We'll share more about the AI enablement programs around second quarter earnings in conjunction with AGE as we complete the foundational work. With that, I'll turn it over to Oliver to go through the financial highlights for the quarter. Oliver.

Thanks, Matt. This quarter once again demonstrates the disciplined execution of our strategic and operational initiatives across the organization. Turning to slide 14 for the financial results. Consolidated revenue of $790 million was up 2% year-over-year, supported by growth in our recurring revenue businesses, creating earnings durability and meaningful margin enhancement. Net income was $52 million compared to $82 million in the prior year, primarily reflecting the following two items. First, restructuring and other costs were $54 million in the quarter, up $34 million, inclusive of $50 million of legal reserve contingencies, which impacted net income year-over-year growth by approximately 61%. Second, depreciation and amortization was $108 million, up $17 million year-over-year, reflecting the addition of Grover assets following the acquisition. Net income per share was 66 cents against 94 cents a year ago, reflecting the aforementioned legal reserve contingencies, which impacted growth by approximately 67%. From an adjusted and PADI perspective, the quarter came in at $115 million, primarily reflecting higher depreciation and interest expense associated with the Grover acquisition, partially offset by EBITDA growth and margin expansion across all businesses. On a per share basis, adjusted MPAT-A per share grew 7% to $1.45, reflecting the continued benefit of our share purchase program. Consolidated AE bid up was $327 million, up 5%, which I'll walk through on slide 15. The $16 million year-over-year increase is primarily driven by gaming, which contributed $17 million of growth driven by North American Gaming Operations Unit installs and revenue per day performance, inclusive of Grover. As mentioned, our upcoming hardware and content launch is expected to be a meaningful catalyst for second half performance. SidePlay EBITDA was up $2 million, driven by continued DTC expansion and player-based monetization. With stabilization in our player base, we will continue to target UA investments prudently to drive monetization. iGaming added $6 million of EBITDA, driven by the continued expansion of first-party content margins and revenue growth. The UK tax increase will be a slight headwind to our iGaming EBITDA margins in the second half of the year, in addition to a moderated top-line growth. Corporate was a $9 million headwind year-over-year, primarily driven by incremental investments to support our initial AI infrastructure build-out, as well as elevated legal legacy costs that I mentioned last quarter. Moving forward, corporate costs should be in line with our historical reverie. From an adjusted MPAT-A perspective, the $16 million AAPA DELF flow-through is the primary positive driver. Against that, higher depreciation amortization of $7 million and interest expense of $13 million are largely associated with the accretive Grover acquisition. As Grover's earnings contribution scales and we continue to de-lever, We expect those headwinds to be more than offset over time. Lastly, income tax was a $7 million benefit on lower effective tax rate driven by lower taxes on foreign earnings and reduced global withholding taxes. Turning to slide 16 on cashflow, which speaks to the strength of our cashflow generation this quarter. Net cash provided by operating activities was $139 million compared to $185 million in the prior year period. The year-over-year variance is primarily attributable to the $137 million in payments to resolve legal matters, and importantly, is not reflective of any change in the underlying operating purpose of the business. Adjusted free cash flow for the quarter was $207 million, up 86% year-over-year, driven by the highly cash-generative nature of our business model, favorable timing of receivable collections, and lower tax payments. Recognizing the timing around receivables as well as tax and interest cash payments associated with a quarterly reporting company, the stronger first quarter results should moderate into the second quarter. We remain focused on a trailing 12-month basis to assess the health of our free cash flow, which has improved progressively since the implementation of our cash enhancement initiatives. Capital expenditures in the quarter were $74 million, deployed effectively and strategically to drive long-term free cash flow growth, consistent with our focus on scaling recurring revenue across the business, including Grover growth investments. Turning to cash conversion, we achieved consolidated AEPA and adjusted MPAT-A to adjusted free cash flow conversion rates of 63% and 180% respectively in the quarter. a meaningful step up from 36% and 95% in the prior year period. This improvement reflects both strong earnings growth and the continued execution of our cash generation initiatives, which will be a continued focus for us here at Light and Wonder. Moving on to our capital structure on slide 17, our net debt leverage ratio at the end of March stood at 3.4 times, remaining within our targeted range on a combined basis. Notably, this was achieved despite the $137 million litigation settlement payments made during the quarter, as well as ongoing purchases under our share of purchase program. This is our direct reflection of the continued margin expansion and strong free cash flow generation we delivered throughout the quarter. We're also pleased to see our improved credit profile recognized by S&P, who upgraded our corporate credit rating by one notch to double B in March. Turning to our debt profile, the principal face value of our debt at period end was $5.2 billion. As previously referenced, we successfully repriced our $2.1 billion term loan in January, reducing the margin by 25 basis points to 2%, and generating approximately $5 million in annual interest savings. Our debt maturity profile remains long dated, with an average tender of 4.1 years, and our effective net interest rate for the quarter was approximately 6.32%, with a 53% fixed and 47% floating debt mix. We continue to maintain ample balance sheet flexibility with $927 million in available liquidity to support growth initiatives and navigate uncertainties with the geopolitical conflict and inflation risks. As we look ahead, we remain actively engaged in evaluating opportunities to further optimize our capital structure should favorable market conditions arise. Shifting to our capital allocation framework on slide 18, this speaks to how we're thinking about capital deployment as we move through 2026. Our approach remains consistent and anchored around the three pillars of our blueprint, optimizing our capital structure, returning capital to shareholders, and investing with discipline in growth opportunities that will define our long-term trajectory. We remain committed to reducing leverage to below three times during the first half of 2027. In parallel, we intend to accelerate share purchases meaningfully in Q2, reflecting strong conviction that our stock is undervalued given the share price dislocation. With our robust underlying business and cash generation profile, we see a compelling opportunity to deploy free cash flow on share buybacks while reducing our leverage and remaining within our targeted range. Turning to shareholder returns, we bought back $22 million of shares in the quarter after strong buyback activity in the fourth quarter, as we stayed prudent navigating potential broader environment risks. Since the inception of our two share purchase programs, we have returned a total of $1.9 billion to shareholders in the repurchase of 24.6 million shares and CDIs, representing 25% of total outstanding shares prior to the program commencement. We have $314 million of remaining capacity under our current authorization. and our flexible capital structure enables us to deploy that balance sheet capacity in a way that balances both near and long-term shareholder value. Lastly, on investments, we continue to allocate capital strategically across R&D and content development and growth initiatives spanning across our platforms. R&D and CapEx investments in the first quarter came in at 17.8% of consolidated revenue. Importantly, we continue to lay out the foundation of our AI infrastructure, which is expected to be a meaningful driver of efficiency and capability going forward. Taken together, these three pillars reflect a balanced and disciplined approach to capital allocation, one that supports both near-term financial performance and long-term value creation to our shareholders. Before we move to Q&A, I'd like to provide further clarification on how 2026 is going to shape up in addition to the guidance and modeling parameters provided at the beginning of the year on slide 20. Subject to external uncertainties, including geopolitical developments and potential regulatory changes, we are forecasting mid to high single-digit consolidated EBITDA growth for 2026. I want to take a moment to walk through the key factors embedded in this guidance. We are absorbing approximately $40 million in headwinds from external factors outside our control, principally U.S. tariffs and the recently enacted UK iGaming tax changes. Additionally, we're carrying an estimated $20 million of impact on planned investment spend related to AI infrastructure and new market openings, including Grover and Indiana. These investments will support not only our 2028 targets, but also set us up for the long run. Lastly, we also anticipate approximately $10 million in legacy legal costs. Against that backdrop, we believe delivering mid to high single-digit consolidated EBITDA growth is a strong outcome and one that translates into another year of meaningful adjusted MPAT-A and adjusted earnings per share growth. On the shape of earnings through the year, we continue to expect the cadence to be broadly in line with 2025. This reflects the natural cyclicality of our industry and our customer CapEx intentions. Underpinning all of this is our growing recurring revenue base, which continues to provide resilience and visibility across the business. We remain committed to our long-term targets as referenced in the appendix as we navigate this ever-evolving macro and industry landscape diligently for sustainable growth. And now with that, I'll turn it over to the operator for your questions. Operator?

Thank you. To ask a question, please press star one one on your telephone and white for your name to be announced. To withdraw your question, please press star one one again. There may be a short pause while we compile the Q&A roster. One moment for our first question. And our first question comes from the line of Andre Fromia of UBS. Please ask your question. Your line is open.

Thank you.

Good morning. Just wondering if we could start talking about the drivers of the ops business. So from an installs and fee per day perspective. So in terms of reconciling what we've seen in the quarter, we've seen 650 premium, 660 Grover. but maybe you could talk through the drivers of the non-premium. Is that solely explained by New York VLTs coming out? And then with reference to the outlook, you've held the 500 per quarter guidance. Is that true every quarter or is that something we should think about as sort of the average through the year?

Yeah, hey there. Fair bit to unpack there. I thought the underlying gaming ops performance by Premium Gaming Ops was another solid quarter for us. Like you said, 650 net ads, fee per day up 8% year on year. So I thought that continues to be a powerhouse of the business and performing very well. We've guided to more than 500 a quarter throughout the year and you can expect that from us. It'll be a fairly consistent cadence of delivery from that business it's all underpinned by you know the the number of great performing titles we have that you can see on the iris chart so yeah that's i would say that from all the businesses that's the best performing business we have is the gaming ops um premium league so we're very happy with that um grover's had another great quarter both organically in existing states and then we're in indiana now as you know and scaling there nicely we just launched our first like Wonder Games on the Grover platform and it's off to a very good start. That's kind of a third or fourth tier brand for us. So kind of plays through on the thesis that our content on the Grover platform is a recipe for success. So you'll see that playing through. Yeah, the noise and the number, candidly, was completely New York lottery. That was a casino that switched from a VLT market. It's been a VLT market for over a decade. We knew this was coming. We actually thought it was gonna come two, three, four, five years ago. It finally happened. So they finally have class three casinos in New York. So puts and takes there. Obviously a good thing for us on the for sale side. They're a big tables customer for us going forward. So opportunities on both premium leased for sale tables, but a net drag on the on that non-premium lease footprint. Obviously, much lower fee per day, so the revenue flow through is not as dramatic as the loss in units. But something we've forecasted, something we knew was coming, something that's kind of in our plan, it's in our guide, it's in our full year guidance number. So yeah, I'd say that's the best way to kind of frame up the leasing footprint and the noise that you see in the number. It is that specific New York lottery transfer over to Class 3.

And just to follow up on that, so the loss of those VLT units, you said that was supportive for your outright sales. Did you pick up any Class 3 ops installs in what replaced those or was it all outright?

Yeah, there were some premium gaming ops installs and they'll likely be more down the line. Some of those VLTs will be kind of repurposed into other locations in the market. So, yeah, it's an evolving landscape. But, yeah, something that's not unique to us, you know, all of our major competitors have the same set of removals and conversions to Class 3 typical casinos. So, yeah, there's opportunity in that market going forward, notwithstanding that we didn't see that reduction from a VLT perspective.

Yeah, and just to want to add to that is if you think about it from a 26 perspective, it will be a net positive from us in that specific customer. Remember, this is just one customer across 700 plus that we have across the entire U.S., but it should be a net positive for us at 26.

Yeah, and Matt, you mentioned the 8% underlying yield growth. Just wondering if you could unpick the drivers of that, you know, how much was a a mix effect versus the underlying GGR performance or the commercial side of things as well?

Yeah, a combination of better performing products and that's evidenced by the ILS chart. You see that coming through month after month. It's really two major suppliers that dominate that category at the moment, which is fantastic. And then, yeah, GGR is holding up nicely in the face of a lot of geopolitical risk, surging gas prices, number of different factors that could be hitting the U.S. consumer, but they're powering right through it at the moment. It's something to watch closely. But you look at the fee-per-day numbers, you look at the reported GGR, it looks like the market's holding on very well in the face of some pretty challenging headwinds from a geopolitical perspective.

Okay, thank you.

Thank you.

In the interest of time, dear participants, please limit yourself to one question at a time. We will now take our next question, and our next question comes from the line of Barry Jonas of Truist. Please ask your question, Barry. Your line is open.

Oh, great. Hey, guys. I was hoping you could talk more about the visibility you have in terms of the top-line environment today, and maybe just how you're thinking about the top-line growth necessary to hit your 26, and for that matter, 28 EBITDA targets. Thank you.

Yeah, obviously, a little softer quarter than you have come to expect from us. And I would say one quarter doesn't make a four-year guidance, certainly doesn't make a three-year guidance. So if I kind of go down the line in terms of unpacking the businesses, and I'll give you like an honest assessment of kind of where we're at and what drove some of the softness in the quarter. Like we said, I think the powerhouse of the business continues to be gaming ops, which is if you could pick one to perform at peak, that's the one you'd pick. It's the one you ascribe the highest valuations to. It's the part of the business we've been really focused on growing over time. So comfortable with where gaming ops is. I think from a US for sale perspective, I'd say like in the core Class III replacement market, we had a great result in the first quarter. It looks like a 25% share number in that category. It was a little softer on adjacencies. Those things can be quite cyclical, as you know. So lower Canadian VLTs and Oregon VLTs, these are large kind of RFP-driven parts of our business that can drive some cyclicality. So I'd say In US for sale, comfortable with where the class three replacement number is, but then you'll likely see a pickup in adjacency sales throughout the remainder of the year. For international sales, it's really the drag on the quarter, as you can probably see in the numbers. Obviously, Australia share has really fallen off the cliff leading into the launch of a new cabinet. This is pretty typical in markets. The customers don't want to be buying the old cabinet when the new one's on the horizon. And we try to be transparent with customers when new cabinets are coming. Fortunately, the cavalry has arrived. It launched, the Cosmic Jewel Screen launched earlier this week, actually in New South Wales. So that will be the catalyst for us to return to normalised share levels in Australia. We've got a really good product line up there. And we were probably well overdue for a new cabinet refresh in this market. I'm in Sydney at the moment, but this market, you really see a surge in share when you launch a new cabinet. The good news is we launched the Cosmic Jewel Screen in the US in November last year, and it's off to a great start. It's lighting up the charts in the US. So we're confident that that cabinet is of a quality that can really drive share in the Australian market. The same is true in Asia. We were overdue for a cabinet launch there. It launches next week at the Macau Gaming Show. So again, that should be a catalyst for the international sales segment to pick up and make a solid contribution throughout the remainder of the year. If I look at Grover, it's a nice scaling recurring revenue business. It's added another 660 units. We've added the new games from Light and Wonder on the platform. So you'll see that continuing to grow throughout the year. That'll be a great top line driver for us. I mean, the iGaming business had a great quarter, I thought, and that's a business that continues to scale over time, notwithstanding there's some some tax implications there from a UK perspective, which I think Oliver spoke about in the pre-recorded remarks. And then, you know, probably the other drag on the top line at the moment has been Syplay, we'll be honest about that. I mean, the entire category was down kind of mid-single digits in 2025. It's a market that's in maturity, I would say. We don't make excuses for that. We intend to drive growth through that business over time. That's what the team's signed up to do. And, you know, I think you can see at the EBITDA line you know, a nice tick up in the direct-to-consumer composition. So, yeah, all that to say, in Agri, it gave us confidence, you know, notwithstanding quite a dramatic, you know, global backdrop to come out and say, you know, you can expect from us mid-to-high single-digit EBITDA growth over time. But hopefully that color commentary gave you a bit of context about the different operating parts of the business.

Yeah, and maybe, Barry, just to add to that, if you look at, we said this online,

So if you look at the shape of 26, we expect that, again, to be very similar to 25. So if you look at 25, 22%, 24, 26, 28% from a quarterly phasing perspective, I would expect that to be fairly similar. And then to Matt's point, I mean, obviously the headwinds that we're working through, the UK taxes, the tariff pieces that we've been very open about in terms of some of the details there, some of the investments that we're going to make in terms of AI to get us to to stronger outputs here over the next three-plus years. Those are areas that we'll focus in on and obviously try to mitigate as we move through.

Thanks, guys. Appreciate it.

Thank you.

You're welcome.

We will now take our next question from the line of Matt, Brian, and Aaron, Joey. Please ask your question, Matt. Your line is open.

Thank you. I was just picking up on some of the comments I think all of you are making about the acceleration and the buyback in Q2 and just sort of wanting to bring that back, I believe, to maybe Barry's question about visibility and whether those things are tied together, in other words. know as you're ramping your recurring revenue base presumably you know your confidence levels through the next um few quarters is going up so just if you could comment on whether that's correct and whether that's possibly a motivator behind being a little bit more aggressive on the buyback yeah i i think thanks matt we position ourselves really well here over the past couple years from uh from a capital allocation perspective you look at the free cash flow

outcomes that we've provided over the last, I would say, couple of years. We've scaled every single quarter on a trailing 12 months. That's kind of the commitment that we've made. And that certainly gives us a lot of flexibility as we head into, you know, into the next year.

First, I think, first and foremost, I would just give them the dynamic global environment that Matt kind of mentioned. We'll continue to focus on the pieces that we know are going to drive outcomes for us.

So, obviously, the organic investments will We still believe we can do both IMAX and DLF. of the range by the end of this year and then below the middle end of the range by the first half of next year.

So we think we can do both then and certainly generations that we've proven will support that.

Thank you.

Thank you. We will now take our next question from the line of Rowan Sundrum of MST Financial. Please ask your question, Rowan. Your line is open.

Hi, team. Thank you. Yeah, just the one for me. Oliver, just tying into Matt's question around debt. Sorry, you were cutting out, but I appreciate the commitment towards lowering the gearing less than three times by first half 27. But can I confirm, is there an outlook for debt reduction plans

in that period and are you able to give an eta for when you would like for the group to be at the low end of the target range generation perspective you know obviously as we move and as we drive outcomes we will move to the middle again that will apply certain levels of Our expectation right now, and this is where we are, below that, and then we will reevaluate.

I think it gives us a lot of cash in our business. Two and a half is our range.

I think if you apply kind of what our outputs are going to be from a 20-year perspective, that's a lot of cash. That's going to be a lot of dry powder. That will certainly give us a lot of flexibility for your guidance.

Thanks, Oliver.

Thank you.

And our next question comes from the line of Justin Barrett of CLSA. Please ask your question, Justin. Your line is open.

Hi, guys. Thanks for the opportunity. I just wondered if we could go back to the gaming ops business, Matt and Oliver. And in particular, Grover, a really strong quarter there. I was wondering if you're willing to break out, I guess, the net ads that you got in Indiana versus, I guess, non-Indiana. Talk a little bit more about the competitive intensity in Indiana. And then I guess what a question is, you know, can we expect, you know, 600 plus net ads from your Grover business per quarter going forward?

Yes, a business that we really have to talk about, obviously, it's proving to be a fantastic bit of M&A and we seem to be the rightful owner of that. The team's doing a fantastic job, has not missed a beat since joining Light and Wonder in terms of operational prowess, but then you add that, the context of our content on their platform, it's proven to be a great combustible combination. I would say the underlying business is adding games at the same rate it has since we've owned it. And then Indiana's been incremental. We haven't given the exact breakout of Indiana versus the core operating markets. But I would say the underlying organic markets are performing at the same level. And with early innings in Indiana, we see the ability to scale there over time, both by placing more games in these existing locations. We've had a few competitive replacements already just off the back of our strong service. There's locations that haven't added games yet, so that will continue. We've guided it not quite 600 level, but I think we've said we can do more than 300 units a quarter for Indiana. That'll kind of ebb and flow, but it'll be a consistent, repeatable set of net ads quarter after quarter. There's still lots of runway in existing markets and in Indiana. And then I said in the pre-recorded remarks, New Mexico is a market that's coming online. We've got New York as a potential market. We've got Maryland. We've got Minnesota. There's some legislative activity in Alaska. So, I mean, multiple kind of vectors of growth for us. We're just thrilled as part of the portfolio.

And, you know, lots of growth for us.

It seems like we've had some technical issues with

We're up in record here, but clearly just given the highly castrated nature of our businesses, our intention is to move towards the middle end of the range by the end of this year. Again, below the range by the mid part of next year. So we'll continue to kind of evaluate our debt structures here.

I think broadly speaking, you know, I'm very happy with how we've improved our capital structure over the last couple of years. If you look at what S&P did in upgrading us to a double B rating, you know, obviously there's still a lot of work to be done, but I think there's going to be a good balance of us being very aggressive. Below the end of the range by kind of bid next year, and then we'll reevaluate the business from there.

All right, thank you.

We will now take our next question from the line of David Fabrice of Macquarie. Please ask your question, David. Your line is open.

Good morning, Matt. Good morning, Oliver. Just to follow up on Grover. I'd be really keen to understand what's happening within Indiana. I mean, there's articles out there quoting the Indiana Gaming Commission suggesting there's 2,500 e-pools in the market since it opened. So I'm curious if that market number's correct. And let's presume half your installs of the 660 went into that market. Your competitor has significantly more market share. So curious to understand whether that article's correct and... whether you can improve market share from here or what's happening within Indiana specifically?

Yeah, look, great question. We're off to a good start there.

It is early innings, I would say. We're a little bit below where we typically would be when the market gets to full stabilisation in terms of share. This has happened in lots of the markets that we operate in. Our view and Grover's view has been over time is to win off the back of great game performance and great service and not off deteriorating unit economics. So we want to make sure we're maintaining the right fee per day and we're making the appropriate investments for the appropriate returns. So over time in markets like Ohio, Kentucky, we've really gotten to reasonable market share positions over time by playing the long game on game performance and service. I don't know if that note you said is completely accurate, but we're a little bit below where we would be once the market gets to full maturity, but we've got a plan to get back to where we have been consistently and doing it in a way that protects unit economics.

Got it. But you wouldn't be, I mean, is it easy to displace units by the competitor? It takes a while. I mean, they've committed the capital to put those machines into their venues. It's not like you can walk in there and start displacing them pretty quickly.

We've already done it, David. So it's happening right now, not two months into the market being live. So it's active. These are charitable locations. So you have to protect the relationship through the way that you service them as opposed to legal action. These are veterans organizations. So it's really about the level of service and gain performance you deliver as opposed to long-term contracts that lock things in.

David, just to add to that, it's not necessarily capital intensive for these customers. It's a recurring revenue business. And so for those that don't have those long-term contracts, we certainly have the ability to go in with our customer service with our high-quality content to go and convert like we've done in the states that we participate in today.

Appreciate that. Thank you very much.

Thank you. And our next question comes from the line of Kai Ehrman of Jefferies. Please ask your question, Kai. Your line is open.

Morning, guys. Thanks for taking my question. Just following up from Andre's earlier question on the impact of the VLT change in New York, could you please help give us a steer on the kind of underlying results in gaming ops installs and outright sales in the US kind of excluding the sort of benefit from that one location? And as a follow-on to that, given the lower fee per day units dropping out, your gaming margin at 53% seemed to be sort of better than kind of expected in that low 50s. Could you talk about maybe the drivers of that and your outlook for gaming margins for the rest of the year?

Yeah, so I think broadly speaking, you know, we continue to show, and this is why we introduced kind of a more specific premium KPI to kind of bifurcate some of the noise that's going to be inevitable in this print, and You know, Resorts World is still kind of working through their transition, so there's still some to go. So I think broadly speaking, I think Matt made this comment earlier. We would expect, call it that, 500-plus units from a premium point of view. That clearly has given us ample room and growth in our RPDs, and we expect that to trend in those directions for the balance of this year. And then if you think about premium right now, that's about 56% of our North American install base. And that's going to continue to kind of scale up here as we move through to the rest of the year. I don't know. Is there anything else, Matthew, you would add to that? Did that answer your question? I'm happy to.

Yeah, I think it's just misunderstanding. Obviously, you put the fee-per-day benefit with those coming out, but just the outlook for margins going forward, do you think there's going to be more fee-per-day mixed benefits throughout the year, or are there any other things that's going to be driving that gaming margin as we move throughout the rest of the year?

Thanks for the reminder on that. Yeah, no, I was very pleased with, obviously, our margin execution, just broadly speaking across the business.

Gaming specifically, obviously, with the recurring revenue mix this quarter, obviously, we're going to have a bit of an uplift relative to the guide that we provided. You know, as we kind of get into the second, third, fourth quarter and game sales become a bit more prevalent, obviously, we're working through things like tariffs, et cetera. That should, I would say, normalize. But our expectation is to scale gaming margins sustainably as we move forward. And that's all part of the margin enhancement initiatives that we put forward. A lot of the things that Anthony Fermata and the team are working towards, those are areas we'll continue to kind of go on the manufacturing side to get on in some appropriate ways. So, yes, I would expect margins to continue to move sustainably north from here, and that's going to be the expectation that we have as a power company.

Great. Thanks, Oliver.

Thank you. And our next question comes from the line of Adrian Lamy of Citi. Please ask your question, Adrian. Your line is open.

Oh, hi, Matt and Oliver. Just wanted to focus on SIPLAY. We've seen a material slowdown here in earnings growth this quarter compared to prior quarters, and that's despite DTC penetration, again, increasing very strongly. Looks to me it's partly due to higher costs. So my question is two parts. Is the higher cost simply due to the higher UA investment you mentioned earlier? And secondly, is this UA needed just to minimize the loss of revenue? Or do you think you can actually flatten out or even get back to some top line growth in this business, please?

Yeah, great question. Maybe I'll kick it off with them and you can add to that.

I think from our point of view, and Matt made some comments on this earlier, I think if you look at some of the underlying KPIs, it gives us a bit of comfort that we are stabilizing and moving in the right direction. If you look at KPIs such as Dow, we had slight growth sequentially, quote-unquote, MPUs as well, sequentially growth. We saw Amerpu grow nicely year over year. And so when you start to see those levels of KPIs and engagement, that's when we start to drive a little bit more, I would say, high return UA spend. And that's what you saw in Q1. Q4 is obviously a seasonally lower quarter for us in terms of that investment, just given the CPIs during the holidays.

So Q1 is typically when you would turn that on. And so as we start to see that momentum build, we want to be able to top of the funnel in terms of Dow.

And that's what the teams are starting to kind of work through the balance of this year.

Okay. Thanks very much, Oliver.

Thank you. And our next question comes from the line of Liam Robertson of Jarden. Please ask your question, Liam. Your line is open.

Oh, thanks, team. Hi, Matt. Hi, Oliver. Just quickly one on the mid to high single digit A, the dark growth outlook. Obviously, you've called out 500 bps of adverse impacts on external factors, strategic investments and the legacy costs. Appreciate the colour there. Just within that, I'm keen to look at some of the aspects that might not repeat beyond FY26. I mean, it looks like legacy costs, they obviously won't repeat into FY27. But then can you give us a sense of what else you expect to reverse in either FY27 or 28, particularly maybe just within that strategic investments bucket? Thanks.

I think the one-time pieces that you look at is obviously to your point, the legacy legals that we should start to lap over.

I think some of the other investments in terms of AI, we're going to continue to kind of evaluate what the right investment levels are to drive the outcome. I think we're going to come back to the broader market here in the near term to give a little bit more detail on what we're going to be executing against and committing to from that program perspective here later this year. But I would expect we'll continue to kind of evaluate that. I think the one piece that you'll start to look at is the UK tax implications. I think once you lapse that into next year, you'll start to get back to normalized growth that we would expect both at the top and bottom line from an iGaming point of view. So I think there are going to be some puts and takes this year. I think what I mentioned earlier in terms of margin holds true. Our expectation is to sustainably grow this margin.

here over not only this year but through the 28 guide and beyond and so that those are the areas that we'll continue to focus in on over the next couple couple of periods appreciate it thank you thank you and our next question comes from the line of mark wilson of rbc please ask your question mark your line is open

Mark, please unmute locally. Your line is open. Please proceed with your question. Thank you.

We're not getting a response from Mark's line. So we have now come to the end of the question and answer session. I'll now turn the conference back to Matt Wilson for his closing comments.

Yeah, I'd like to take the opportunity just to give a bit more context around the AI program that we've been working on, which we think is really exciting. And we think it's going to take a more meaningful and growing part of our investment thesis going forward. We're approaching this with urgency and discipline. We kicked off the AI initiative in 2025, really spearheaded by our CSO as the Chief Strategy Officer. some outside thinking as well to kind of really validate some of our assumptions about what this could mean for our organisation. We want to take a leadership position here. We spent hundreds of hours working on this program of work. It's been board-sponsored. We've made a significant investment in Q1 and we've found capacity this year to invest within that envelope of the guide that we mentioned earlier throughout this call. It's very exciting. We've got 43 initiatives and work streams that we're working on across technology, content, and our operations, and we think it can make a very meaningful impact on our organisation over time. We're really excited to share more about that with you around the Q2 earnings. We're going to come together in August around the AGE show, and you'll have our entire leadership group there talking

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.