SciPlay Corporation

Good morning, and thank you for standing by. Welcome to the SciPlay first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Robert Weiner, Vice President, Investor Relations, SciPlay Corporation. Please go ahead.

Thank you, Operator, and good morning, everyone. During today's call, we will discuss our first quarter 2023 financial results and operating performance, which will be followed by a question and answer period. With me today are Josh Wilson, CEO, and Daniel O'Quinn, Interim CFO. Our call today will contain remarks that include forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call. For more information regarding these risks and uncertainties, please refer to our earnings release issued yesterday and our filings with the SEC. We will also discuss certain non-GAAP financial measures and certain key performance indicators, which are based on in-app purchases only, 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. As a reminder, this conference call is being recorded. A replay of this webcast will be archived in the investor section of our website at sideplay.com. Now, I am pleased to turn the call over to Josh.

Good morning, and thanks so much for joining us. I'm excited to report that SidePlay continued its industry-leading performance with a strong first quarter. Our games again outperformed, hitting tremendous numbers and again setting multiple records. For five consecutive quarters, our year-over-year growth has outperformed the entire social casino market. We accomplished this because we are innovative, focused, and driven by our passion to win. Our side plate teams consistently deliver engaging and entertaining experiences that our players enjoy and demand. We know what is happening and when it is happening all the time. We evaluate and manage the business with precision and real-time KPIs. We invest wisely with discipline and financial rigor. All of this is made possible by our global team of over 800 side players strong. We are united in our mission to be a player-first focus and just win. We began the year with significant momentum, focus execution, winning strategies, and smart investments. Our current achievements are phenomenal and are driving us to push beyond mere success. Our passion to win is deeply rooted in our culture and in everything we do. SciPlay is delivering value to our players and our shareholders, and we are investing in our future from a position of strength. Now, here are the details of Q1's results. Revenue grew to $186 million, up from $158 million in Q1 last year. This is 18% growth year over year, driven by the enduring strong performance of our game franchises. Net income attributable to SidePlay was $5.5 million, or $0.24 per diluted share in the first quarter, increasing by 25% and 33%, respectively, compared to the first quarter of 2022. Our Q1A EBITDA grew to $54 million up from $44 million compared to last year's first quarter. This is year-over-year EBITDA growth of 21%. We are growing profitability at a faster pace than revenue growth, illustrating the leverage we are gaining from our investments. Combined, our investments in the SidePlay engine and the platform scalability are setting us up for long-term growth. In the first quarter, our payer base grew and we increased monetization from existing payer cohorts. These two points are very important. They forecast the value of our games and their sustainability. Our games attract, retain, and grow players, and then convert them to payers. We have six million active customers, and just over 10% are currently payers. This gives us enormous opportunity to continue expanding our payer base. We are proving these points by achieving several record KPIs, resulting in strong sequential growth in Q1. We had high performing payer conversion rate of 10.3%, up 16% year over year. In fact, we hit our highest number of payers again this quarter to more than 600,000 growing 6% over Q4 and up 12% year-over-year. We achieved Q1 ARPDAU of 89 cents, an increase of 20% year-over-year. Our average monthly revenue per paying user increased by 5% year-over-year to $97.43 compared to $92.45 in Q1 last year. Q1 was a very strong quarter and exceeded our expectations. Our game franchises continue to provide compelling entertainment to our players. Jackpot Party Social Casino had strong double-digit growth. The game set its third consecutive quarterly revenue record and maintained its number one ranking amongst all social casino games in the U.S. Quick Hit Slots posted its fifth consecutive quarterly revenue record. The game hit a new record with the highest number of BAU in its history. Quick Hit Slots is now one of the fastest growing games in social casino. During Q1, we launched a winning day campaign with Jerry O'Connell for Quick Hit Slots. The ads were run live on national TV, including major networks, cable, and streaming devices. The campaign was integrated in-game, on Facebook, and other digital channels, creating continuity. And it yielded great returns. Quick Hit Slots was ranked number one in the free casino games category on the Google Play Store during a majority of the campaign's period. The results were impressive. We continued to attract new players and new payers. As a result, We have extended the campaign into the second quarter. Overall, we continue to significantly outpace the social casino market. Our three main investment pillars, the side play engine, ad tech, and talent are driving our industry leading performance. The side play engine is a centralizing force. It is instrumental as both a portal and a unifier of data, cross-platform learnings, and as a stout provider of resources across our organization. Whether it's data science, economy, features, or game mechanics, the SciPlay Engine is a scalable and robust solution. It provides real-time insights into player behavior, enabling us to offer improved segmentation, specialization, and game performance. The player's experience is enhanced and heightened. This leads to increased playing time and increased spending. Player conversion rates remain high. Our players are more inclined to pay and pay more often. This is due to our team's improving player analytics and the introduction of new content and features into our game. Our LiveOps teams have developed dynamic game roadmaps that increase engagement and monetization. The teams leverage the SciPlay Engine's real-time learnings to optimize our player relationships and deliver unique, personalized experiences. This improved segmentation and specialization has yielded positive results. We are growing our payer base by converting existing cohorts. SciPlay effectively adapted to the changes in the mobile gaming landscape by investing in our ad tech. Our teams develop proprietary ad tech that includes new retention retargeting tools and optimized ASO models. Player-focused content marketing and creative-based segmentation are incorporated to improve engagement, retention, and conversions, all factors that drive revenue growth. This year, we are evolving our marketing activities into mature growth spaces by focusing on reactivation, audience expansions, amplified brand awareness, all of which increase traction and further propagate our growth. We invest in our talent and provide the tools and support to cultivate professional development and growth. Internal initiatives programs, and structuring have further invigorated our teams. Our teams are more productive than ever before, and our gains are greater than ever. For example, we strategically manage our games portfolio from a holistic view across the entire organization, monitoring, adapting, pivoting, and maximizing the capabilities of our agile platform. Our teams evaluate KPIs in relation to specific revenue, and both fixed and variable costs. This enables the implementation of real-time initiatives in our games. This mindset is embedded in our culture and in the SciPlay DNA. We live and breathe this very hands-on approach every day, melding great data with great innovation and great execution to achieve our outcomes. At SciPlay, we continue to invest to drive long-term growth competitive advantages, profitability, and market expansion. We set stringent objectives and put each investment through rigorous financial evaluation and gate each stage of the investment's life cycle. When we see wins, we reinvest based on ROI. When we don't see the expected returns, we realign capital investments. We are disciplined in our execution and capital deployment and remain ROI focused every step of the way. For example, first, DTC platform, which is currently in the evaluation and testing phase. We are now in the crawl stage of our crawl, walk, and run release process, ensuring we have maximum protection of all of our valuable customers. Second, we are broadening our scope to find new players with new marketing initiatives, ad tech, and brand awareness efforts, allowing us to continue increasing our marketing spend ROI. And finally, our global operations footprint is expanding into areas of known for engineering prowess. This quarter's performance is a clear reflection of our team's strong execution an unwavering passion to win. Our side players around the world are responsible for our success. Our teams build the technology, develop the games, and are continuously innovating to provide the greatest entertainment experience possible. We are so proud and grateful of each side player's contribution. We remain committed to our players, our teams, and our shareholders. Our dynamic growth plans Our player-first focus and the resilience of our game franchises are the key elements to our success. And now to you, Daniel.