Q3 2024 Light & Wonder Inc Earnings Call
Speaker Change: Hello everyone, the Light and Wonder 2024 third quarter earnings conference call will begin shortly. If you would like to ask a question please press star followed by one on your telephone keypad. Thank you for your patience.
Thank you. Thank you.
Speaker Change: Hello and welcome to the Light and Wonder 2024 Third Quarter Earnings Conference Call. At this time all participants are in a lesson only mode.
Speaker Change: A brief question and answer session will follow the formal presentation.
Speaker Change: If you would like to ask a question, please press star followed by 1 on your telephone keypad.
Speaker Change: We will also discuss certain non-GAAP financial measures.
Speaker Change: 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.
Speaker Change: As a reminder, this conference call is being recorded a replay of this webcast and accompanying materials will be archived in the investors section of our website.
Matt: With that I will now turn the call over to Matt.
Matt: Thank you, Nick and Hello, everyone. Thanks for joining us today.
Matt: Before diving into the third quarter results I'd like to congratulate the team for another strong showing at <unk>, we showcased a lot and one of the strongest ever content roadmap.
Matt: Last month with over 80 unique game titles across our high performing cabinet.
Matt: We've gotten great feedback from our customers on across the industry.
<unk> come a long way since the transformation with gains in offering that are market tested with downtown.
Matt: Importantly, the success you are saying is attributed to the diligently calibration about R&D engine identifying and aligning resources to the most impactful initiatives they dropped down performance.
Matt: Recently, we launched our newest studio in Reno, which will support a sustained growth aspirations, well past 2025, and I'll be on my way a lot and one of the annual Best Times workshop. Shortly an event, where we all gather that Amazon is the collaborative environment to experiment and innovate new ideas for the future.
Matt: This is the culture, we are fostering and the teams are excited to have the opportunity to engage with other game developers across the organization to support the next chapter of our growth.
Now turning to the quarter, we continue to see stability and resilience both industry wide and within our operation.
Matt: Results for the third quarter can confirm ethics that as evidenced by a 12% increase in consolidated revenue year over year.
Matt: Representing our 14th consecutive quarter of consolidated revenue growth and not consecutive quarter of double digit consolidated revenue growth.
Matt: Our global scale, and the breadth and depth of that diverse portfolio positions us as a true end to end casinos solutions provider, allowing us to capitalize on growth opportunities across land by social and organic channels.
Matt: To that end I'm also pleased to highlight that outgrowth is propelled us into the ASX 100 in Australia as we continue to be one of the fastest growing company with further prospects the growth on the horizon.
Matt: And now on to our operational highlights.
Matt: In gaming, we continue to see strong momentum in our block.
Matt: Executing our commercial strategy.
Matt: Our operator partners recognize the value and after the habit and franchise lineup along with that robust roadmap and that translated into results we are pricing throughout the season.
Matt: Our North American premium installed base has grown for 17 consecutive quarters.
Matt: Steady at approximately 50% of our total north American install base as of the end of the quarter.
Matt: We were able to convert approximately 35% of the footprint associated with approximately 2200 dragon sign yet that were impacted by the preliminary injunction on the floor with guidance from that date portfolio of evergreen franchises.
Matt: Additionally, we added 600 incremental units of the installed base compared to the prior quarter. This is a testament to the value proposition of cabinets and games also and we will continue to work diligently to ensure the longevity and sustainability of that product.
Matt: <unk> in North America remained strong at $49, maintaining the step up you've seen as a guide performance trended positively over the last two years through continued investment and optimization of our R&D engine.
Matt: <unk> continues to fire on all cylinders, both domestically and internationally on record global shipments of over 13000 units.
Matt: I would also like to note that wanted to help with number one ship share in North America.
Matt: Second quarter segment, the Dragon Chinese not commercialized in anyway.
Matt: Performance is reflective of the power of our brand portfolio as well as our expected commercialization strategy.
Matt: As we continue to expand our presence in adjacent markets, We recently announced our entry into the Manitoba the LTE market.
Matt: We expect that momentum to continue as we further proliferate in the adjacent international market with.
Matt: The strongest bio product lines that we have on offer.
Matt: Our strategy is simple.
Matt: That is to build and extend our suite of brands and franchises with engaging game mechanics that plays enjoys.
Matt: Many of the legacy plans, you see such as dancing drums ultimate filing embedded some kind of moolah rising triple seven and quick hit just some of the Staples you stay on slot floor and they continue to rank atop the performance job.
Matt: Most recently you saw us being the number one core title Hoffman, even more of it to a lease model under the money match an extension and initial performance is phenomenal died doing as the number one top indexing new premium Wap game.
With that but also introducing a huff and puff Hot had edition, which we plan to offer on the highly successful Appeals spring cabinet.
Matt: Additionally, the Indymac Kazmi cabinet is also recognized as one of the most sought after in the industry and we've followed up with a cosmic upright, which will be supported by a variety of play a favorite franchises.
Matt: Importantly, our continued improvement in our <unk> strategy has enhanced the heap right about games dramatically and the robust product roadmap, we've laid out and show sustainability and optimal value was bought in one of those offerings. We are still in the very early inning I'm just starting to stay the fruits of that investment over the past couple of years and I'm excited.
Matt: What's to come in the future.
Matt: Our customer centric focus is also bringing significant commitments and reinvestment back into the system. This year.
Matt: Year to date with secured 10 deal with Amp.
Matt: Most recent announcement highlighted by weight of enhanced capability adopted by our operator partners to complement their existing CMS. These.
Matt: These wins show an increase level of confidence of Martin Wonder as it provide us and our ability to deliver product.
Matt: A meaningful relative covenant.
Matt: As a matter of fact, you're seeing us bring the same approach to electronic table game with continued innovation on our obsidian product as you rollout older Roulette and the hybrid studying format.
Matt: We're also reinforcing our leadership position and bus shufflers and tables.
Matt: Just on building our recurring revenue bulk program, where customers can enjoy a portfolio of engaging table games I'll take my personal favorite is the double damn madness, blackjack and exciting twist on the traditional game, which we've recently launched.
Matt: To sum it up I'm very excited with the progress and outlook in our gaming business and the consistent execution on our diverse portfolio gives me confidence that we will drive sustainable growth in the dining business over the long time.
Matt: Turning to thoughtfully, where we continue to be a growth leader in plush casino underpinned by array of land based franchises and cross platform strategy.
Matt: This quarter proves to be designed with our continued execution on our strategy as we delivered record monetization method.
Matt: It was evident again across our four largest game with quick hit slots and 88 fortunes, both once again achieving record revenue.
Last quarter, we highlighted opportunities for incremental marketing spend and that's reflected in what we've seen with geismar from new players as we build out new cohort.
Matt: Our team is one of the best in the industry in deploying the right amount of user acquisition resources to optimize return with a focus on engagement and monetization.
Matt: Plenty of lifetime value.
Matt: In fact, you continue to stay healthy year over year growth across average revenue per daily active user on average monthly revenue per paid either both key metrics driving the outsized growth you have seen over the last two.
Matt: Food and game feature in Playa management is essential and we manage these assets well staying nimble to changes in trend.
Matt: We are adaptable to user preferences with real time updates focused on delivering the best in the play.
Matt: Yes.
Matt: Data analytics is a strength and we will continue to cross pollinate across the.
Matt: Portfolio of games through our proprietary algorithm.
Matt: With regards to direct to consumer platform I'm pleased to say that we continue to progress steadily in the direction, we had planned for.
Matt: As previously mentioned this is the size relief, which will continuously assess the repeat player engagement with broader rollout expected over the long term.
Matt: Overall, the company is high and our ability to optimize the spotlight engine. In addition to executing to our core competency. We're also introducing Scott when you get that are accretive and complementary to the portfolio.
Matt: <unk>.
On the I gaming segment, we continue to cultivate with the expansion of our game content and services portfolio and where we took the number one U S. G. G I share in the quarter on the back of that franchise.
Matt: While we expect future market opportunities, we understand that execution on our product roadmap U K and that is done by leveraging our vast library of land based and digital native content as well as by scaling out aggregation platform to our advantage.
Matt: I would not the comparisons were impacted by certain termination thing that benefited the prior year quarter.
Matt: Overall industry growth was strong in North America on record Jgr levels, and we capitalize on the opportunity with several key game launches, including <unk> <unk> and <unk>.
Matt: We also have launched world of Warcraft pure imagination. The second game in the series with Andrew by the plays either platform.
Matt: <unk> outstanding performance from the initial one currently in the first quarter.
Matt: Looking at the content spectrum broadly.
<unk> 90 to <unk> continue to benefit from new game launches and the scale of our platform with Lightning box G. G are up 38% year over year.
Matt: Judy I once again capitalize on the successful pirates franchise with its best ever really pilots through which led to 30% CAGR growth compared to the prior year period.
Matt: With the expansion of our portfolio and game services capabilities, we aspire to be more than just a leading slot content provider and we are getting sites.
Matt: Recently, we also introduced our first cross platform marketing jackpot product Super Kinda talk with a lot of Quebec.
Matt: We are well positioned with leading products and services to capitalize on this rapidly growing sector and we will continue to innovate to position ourselves for future success and growth.
Matt: As we closed out the year I would like to express my sincerest gratitude to our commercial team and operate apartments for their unwavering support over the past few months.
Matt: We're very fortunate to have a dedicated team focused on solving problems at hand, and long lasting meaningful partnerships, we've built with our customers over the past several years I'm confident that we will grow together moving forward strong whenever the team.
Matt: Looking forward the outlook remains promising a global presence and suite of products gives us confidence in our ability to navigate challenges, while continuing to grow and innovate and most importantly, we have the right group of people to execute on our collective vision to grow the business sustainably one step at a time through our strategy and product roadmap.
Matt: Above all we will continue to invest in talent to drive future growth. We are truly just scratching the surface about potential and I'm excited for what's to come.
Matt: With that I'll hand, it over to all of US to review the quarterly financials.
Speaker Change: Thanks, Matt it's great to be with you all today.
Speaker Change: Our third quarter results reflect the collective hard work and dedication from our business units.
Speaker Change: During the end of the third quarter. Our team is working diligently to ensure stability and continuity throughout the organization and with external stakeholders to ensure minimum disruption to the business and our key performance metrics reflect our efforts.
Speaker Change: As Matt mentioned, we are galvanized and expect continued year over year growth going forward as we March towards our 2025 consolidated EBITDA target.
Speaker Change: That said, we continue to deliver on key financial performance metrics in the quarter with consolidated revenue up 12% year over year to $817 million driven by performance across all three businesses.
Speaker Change: Operating income was $159 million in the quarter, an increase of $12 million over the prior year, primarily due to higher revenue and strong margins.
Speaker Change: Net income attributed to <unk> <unk> per share was <unk> 71.
Speaker Change: <unk> to <unk> 81 in the prior year period on higher restructuring and other costs, which included charges in the current year period related to certain legal matters.
Speaker Change: Consolidated EBITDA increased 12% to $319 million compared to prior year, resulting in consolidated EBITDA margin of 39% for the quarter on sustained double digit topline growth and stable margin contributions across the business.
Speaker Change: Adjusted <unk> increased 23% year over year to $122 million in the quarter.
Speaker Change: Primarily on revenue growth across our businesses.
Speaker Change: Adjusted <unk> per share increased 24% to $1 34.
Speaker Change: Compared to $1 <unk> in.
Speaker Change: In the prior year period.
Speaker Change: Onto our business segments.
Speaker Change: We continue to make significant progress in the gaming business with deliberate execution of our commercial strategy and a diverse product roadmap.
Speaker Change: Revenue grew 15% year over year to $537 million in the quarter. Once again led by global gaming machine sales growth of 38%.
Speaker Change: EBITDA was up 14% to $267 million compared to the prior year driven by revenue growth in the period.
Speaker Change: Gaming EBITDA margin was 50% in the quarter as we further optimize operations for margin opportunities, which was partially offset by product sales mix, including the impact from the maintain order and we previewed last quarter.
Speaker Change: This really highlights our optionality to leverage our optimization efforts for reinvestment or take it to the bottom line.
Speaker Change: Gaming operations revenue increased 5% year over year as we continue to see growth in the North American installed base up 7% to 33151 units led by the continued expansion in our premium footprint.
Speaker Change: Despite the adverse preliminary injunction impact to the last week of September.
Speaker Change: North American revenue per day increased 1% over the prior year period.
Speaker Change: Reflecting the strong performance of our collective portfolio of games.
Speaker Change: We expect some impact to north American revenue per day, and installed base growth in our fourth quarter post dragging trained game conversions.
Speaker Change: However, we do expect continued growth in the North American installed base on top of the retained units impacted by the injunction.
Speaker Change: Global game sales was once again the standout performer as we continued to proliferate into all markets.
Speaker Change: Revenue was up 38%, primarily driven by growth in international sales as well as further expansions into the adjacencies, partially offset by some new and expansion units, we shipped into Asia in the prior year period.
Speaker Change: North American units were up 31% year over year approaching 6100 units a record high in North America.
Speaker Change: While international increased 72% primarily on the previously mentioned maintain deal which had an impact on our global average sales price in the quarter and has a long tail of recurring revenue component, making this an attractive deal for the company.
Speaker Change: Systems revenue was flat in the quarter, primarily impacted by revenue timing, which we expect to realize in the fourth quarter.
Speaker Change: In addition to the deals we signed.
Speaker Change: Quality of our hardware is driving further upgrades, which allows for enhanced all around systems capabilities.
Speaker Change: Maximizing our software's value proposition to optimize operator force.
Lastly, with respect to our table products business revenue growth was impacted by elevated utility sales to an international customer in the prior year period.
Turning to Si play.
Speaker Change: Revenue increased 5% year over year to $206 million driven by the strong ongoing performance of our social casino games with record revenues from quick hit and 88 fortunes.
Speaker Change: This is the 11th consecutive quarter that we outperformed the market as the team continues to execute the strategy.
Speaker Change: Further our direct to consumer platform generated $25 million in revenue accounting for over 12% of <unk> revenue in the quarter contributing to an 8% increase in EBITDA year over year to $66 million and driving EBITDA margin expansion.
Speaker Change: I play margin was up 100 basis points versus prior year to 32%.
Speaker Change: The lift from TTC, partially offset by the increased marketing costs that we previewed on our last call.
Speaker Change: We continue to rollout our DTC offering in phases setting the stage for significant long term growth and sustainable market presence for this channel.
We continue to achieve strong monetization metrics across the board maintaining record high average revenue per daily active users at $1 four in the quarter up 8% year over year.
Speaker Change: While average monthly revenue per paying user was approximately $113, a 6% increase over prior year period.
Speaker Change: Payer conversion rate continues to approach, 11% as we consistently delivered the best gaming experiences to our players to the breadth and depth of content and the diversity of our portfolio.
Speaker Change: We will continue to reinvest in user acquisition to expand our player base with a focus on engagement and monetization initiatives.
With the opportunity for further deployment on high return marketing spend in the fourth quarter.
Speaker Change: <unk> proven track record and exceptional execution gives me full confidence in the team's ability to drive sustainable growth.
Speaker Change: By capitalizing on our strong portfolio of game franchises and strategically reinvesting in the business.
Speaker Change: Well positioned to maintain our leadership in this space.
Speaker Change: Answer I gaming, where we maintain record revenues of $74 million up 6% year over year, driven by continued growth in the North American and European markets and successful content launches.
Speaker Change: EBITDA was $24 million in the quarter with EBITDA margins of 32%, reflecting continued investment in our studios to increase gain volume and scale the business.
Speaker Change: As previously discussed revenue and EBITDA in the prior year period benefited from $3 million and certain termination fees impacting revenue and EBITDA growth by 4% and 12% respectively.
Speaker Change: Importantly, <unk>.
<unk> on our Ods aggregation platform continues to expand across the board with Canada up 29% against prior year in North America at record levels in the quarter.
Speaker Change: Wagers process through our I gaming platform totaled $22 $8 billion during the quarter another record high.
Speaker Change: We will continue to scale the <unk> business.
Speaker Change: Leveraging our cross platform strategy.
Speaker Change: With extensive scale of our platform and the depth of our network as well as our growing portfolio of innovative offerings and market centric content roadmap.
Speaker Change: Our uniquely positioned to capitalize on the opportunities ahead of us.
Speaker Change: As you look around the success stories in the gaming industry, you will see that this is a culture and R&D centric business, where sustainable growth is not achieved through subtraction.
Speaker Change: We understand it is important for us to stay focused on our long term aspirations without compromising what's core to the strategy.
Speaker Change: Every decision we make here goes through a rigorous planning and decision process.
Staying nimble and adaptive as a hallmark of our organization.
Speaker Change: As a matter of fact, we've navigated dynamic environments and consistently delivered strong financial performance as evidenced by the strong growth and margin outcomes that we achieved quarter after quarter.
Speaker Change: That said, we continue to identify and execute our margin enhancement initiatives as part of our regular business review.
Speaker Change: Our key focus for us in optimizing operations by eliminating redundancies.
Speaker Change: Elevating system migrations for long term efficiencies and prioritizing key initiatives by right shoring and allocating resources to high value projects to fuel top and Bottomline growth.
Speaker Change: One of our key advantages is our healthy balance sheet.
Speaker Change: At quarter end, we had approximately $1 1 billion of available liquidity, including approximately $350 million of cash on hand, enabling us to be strategic on multiple facets as we move forward.
Speaker Change: Consolidated operating cash flow was $119 million in the quarter and free cash flow was $83 million in the quarter, primarily on changes in working capital, including the timing of collections of receivables related to long term financing agreements such as the <unk> deal.
Speaker Change: Overall, we expect annual cash conversion should trend positively over time, as we continue to scale and optimize for efficiency.
Speaker Change: We move towards the lower end of our targeted net debt leverage ratio range of two and a half to three five times ending at two nine times in the quarter and we continue to preserve the options and flexibility to execute on our capital allocation blueprint.
Speaker Change: We remain opportunistic with share repurchases. In addition to programmatic buybacks, we had previously implemented.
Speaker Change: During the quarter, we returned approximately $44 million of capital to shareholders through buybacks and we believe there is a tremendous amount of value to be realized here as we continue to grow our earnings and free cash flow.
Speaker Change: Additionally, we will continue to reinvest into the business through R&D and capex enhancing our capabilities to drive sustainable growth and bolster our industry leadership positions.
Speaker Change: As for M&A, our position remains consistent we will continue to look at options that are complementary to our core business with a disciplined approach to the extent that these opportunities are accretive and exceed our return thresholds.
Speaker Change: With some of the recent announcements and developments I would like to provide some clarity as we're nearing the end of 2024.
Speaker Change: We expect growth in consolidated EBITDA to be above 10% for the full year, even with the near term impact of the Dragon train injunction.
Speaker Change: Our mitigation efforts position us well for an expected return to a growth trajectory in 2025 remaining on track for our affirmed $1 4 billion consolidated EBITDA targets.
Speaker Change: Underpinned by our high performing games and robust roadmap, which continues to gain traction both domestically and internationally.
Speaker Change: Corporate costs will be impacted by timing legal developments and we do not anticipate any material changes from what we discussed last quarter.
Speaker Change: I'm also happy to introduce a target adjusted and Pat a range for 2025 or $565 million to $635 million to supplement our 2025 consolidated EBITDA target of $1 4 billion for our diverse set of investors that are tuned to a range of five.
Speaker Change: <unk> and business performance metrics.
The highly cash generative nature of the business combined with a healthy balance sheet and strategic capital allocation program has proven to be a strong framework to drive shareholder value creation.
Speaker Change: I am encouraged to be working with the best in the business.
Speaker Change: Main highly confident in our journey as a compounded growth over the long run.
Speaker Change: And now we will turn it over to the operator for your questions.
Speaker Change: Okay.
Speaker Change: Thank you Sue we'd like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: If you would like to remove your question. Please press star followed by Kate.
Speaker Change: When the patents unless your question even show up there nicely.
Speaker Change: And the first question go to Barry Jonas of chest sorry. Please go ahead.
Barry Jonas: Thank you Hey, guys.
Barry Jonas: Was wondering if you could talk more about how the driving trading mitigation efforts are going for both the domestic and international markets. Thank you.
Speaker Change: Yes, Thanks Barry.
Speaker Change: First of all I want to take the time, we had a big disruption happened late in the quarter and you can see here the team pulled together and delivered another outstanding set of results, 12% revenue growth trucks, and how EBITDA growth I think it's a testament to the quality of the team and the culture that we're building.
Speaker Change: I think there's two kind of university that we should talk about when it comes to track and try and mitigation efforts. The first thing is the North American premium gaming off install base. We said we had about 2200 units installed in the U S. We've been able to convert 95% of those games to new title titles like ultimate filing can invite is we got some more guidance.
Speaker Change: So we've lost less than 100 units in the North American installed base, which I think is a great great outcome I think it's a testament to the confidence and support of Wanda I want a healthy competitive environment. That's what we're providing and sorry, you wanted to publicly thank our customer base.
Speaker Change: Appointing us through this.
Speaker Change: Well like I said, good Brian scans coming into that installed base to make sure. We keep that in the field, we have a guy in the submission called happened.
Speaker Change: How did they shouldn't that's an expansion.
Speaker Change: Number one performing game.
Speaker Change: More costs, so that will go into the install base.
Speaker Change: Confident we can maintain this install base goes forward and that we grow off the back of the new product introductions that we showed at <unk>.
Speaker Change: The second kind of universe of mitigation efforts is really the Australia market. If the market were dragged in China is really dominated our pipeline.
Speaker Change: Happy to say, we've shifted our focus in the pipeline to some new guidance when we launched the product at <unk> earlier, this year called Shen lung ablation.
Speaker Change: It got a lot of kudos from from the market was clearly best in short type product that has gone live in Australia, right now and it's performing very well.
Speaker Change: To say the mid point of November with the number one share provider in the Australian market still when we haven't commercialized single track and try and product demand side lots of momentum still underway I think it just speaks to the depth and the breadth of the portfolio drag and try and was one guy. He was a 130 that we make every year.
Speaker Change: The portfolio of design is building great guidance and what for.
Speaker Change: Segments across the gathering clients feel.
Speaker Change: Feel confident about that.
Speaker Change: Okay.
Yes, not just build on that.
Speaker Change: Yeah.
Speaker Change: Yes, just quickly just from a Q3 perspective, obviously, we saw minimal impact there just based on the timing of when the injunction actually went in place in the last week of September there were let's say, it's modest kind of conversion costs that that will impact Q4.
Speaker Change: We will likely have a slight RPT impact just based on the timing of the conversions, but as Matt mentioned, we will continue to kind of monitor performance to collaborate with our customers here over the next.
Speaker Change: Three to six months to ensure that we retain.
Speaker Change: Change the slots on the floor I think in terms of legal expenses corporate costs.
Speaker Change: Obviously the package is based on the timing of the developments on the legal front as I mentioned earlier, we don't anticipate any major material changes.
Speaker Change: The numbers that we guided to late last year. So I think overall, we expect.
Speaker Change: I think a low single digit year over year EBITDA growth during Q4, but thats going to be joining over 10% growth from a full year point of view and then we will return back to kind of this normalized growth rate in <unk>.
Speaker Change: 25, just underpinned by all of the great games that are that next year.
Speaker Change: Sure.
Speaker Change: Perfect. Thank you so much.
Speaker Change: Thanks, Eric.
Speaker Change: Thank you. The next question guys, Hey, David Katz of Jefferies. David. Please go ahead.
Speaker Change: Okay.
Hi afternoon, everyone I just wanted to follow on to that and you talk about sort of the timing of new entrants, particularly in the premium categories.
Speaker Change: Specifically, if we could get maybe some update on Huff and Puff, which is then we've heard some stuff about out in the market. Thanks.
Speaker Change: Right.
Speaker Change: Yeah happy to take that one thanks David.
Speaker Change: Yes.
Speaker Change: Our diverse portfolio beyond Dragon try and like I said, one game in the portfolio I think what you saw in <unk> I know you were there many of us.
On display.
Speaker Change: What's really a manifestation of who we are.
Speaker Change: As an organization as you think about lot and Wanda we came together through M&A. So I really tightens of industries companies like Bally's and W. A mess and shuffle master and each one of these companies and a great set of franchises under the Hood.
That on full display at G. Two way how are you.
Speaker Change: Our new version of dancing drums. He saw our neighborhoods at ultimate filing neither in terms of guidance and planet and importantly, the one that you mentioned, a huff and puff in what we've been able to do is to kind of build.
Speaker Change: That franchise beyond just the original guidance I think this is what I'm, saying does best of the best in the industry at it taking cost impact, which is a 10 year old guy reinvigorating that into how often even more became the number one game in the <unk> market in North America.
Speaker Change: Making a new incarnation of that cold.
Speaker Change: That's a tough commodity matches, which is now the number one performing game in the premium gaming ops. So back so many more.
Versions of that on the shelf for Joey.
Speaker Change: We feel like this is the type of franchise that can be.
Speaker Change: Contribute that for a decade in the portfolio and lots of different ways, we actually have our best guidance workshop on at the mine down in Southern California, where the teams getting together to think about how do they bring that brand to lock in lots of different creative ways across all of our channels not just land buys, but also social casino and gaming site.
Speaker Change: Jay to wait for us was the selling Shaw.
Speaker Change: So on the floor is actually ready for commercialization now we launched a new cabinet of the shallow. So this is close to make up right. It's an extension of the portion of the call reports, it's been the number one cabinet in the marketplace.
Speaker Change: Last year, we had awards that light and Q4, we're going to build momentum on that.
The first quarter of next year.
Speaker Change: Between the combination of.
Speaker Change: Holding onto the fleet that we have that was dragging trying with new games, and then really leveraging this new investment in cosmic upright and these brands that we showed.
Speaker Change: Got the takeaway sharing means we'll kind of continue that game ops installed base growth throughout 2025 really confident that the portfolio probably is well set up for success as we roll into 'twenty five here.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Thank you. The next question David that breadth of Macquarie. David. Please go ahead.
Speaker Change: Oh, Hi, Matt Hi, Oliver.
Speaker Change: I was wondering if you could comment on discussions with customers in the North American market at an industry level. I mean, firstly can you provide any insights on customer budgets I guess I'm curious to understand where the volumes are sustainable at current levels.
Speaker Change: And then secondly to that just within gaming ops, there's been a lot of debate, whether premium gaming ops or fully penetrated I can say and I see your thoughts on whether this can increase so maybe it reduces as part of the school is going forward.
Speaker Change: Yeah.
Speaker Change: Yes, great question, but obviously the macro is something we've been talking about on earnings calls for the last I'd say three years I think we all look at it with a healthy level of paranoia to say, how the macro kind of impact the gaming segment I think what we see from our vantage point the macros largely supportive of a replacement market consistent with 24 might be moving to 25.
Speaker Change: That's what we're hearing from customers, obviously meaningful customers have made a lot of corporate cost it doesn't travel calculates it in the aggregate we feel like the 25 or type of market is set up nicely and our job really is to take maximum share from that market proud to say in the second quarter. We were the number one supplier in the U S from a share perspective, we'll see.
Speaker Change: Wherever you want prints in Q3, but we feel like we might have maintained that in Q3 as well.
Speaker Change: I think importantly, we've worked really hard at the time to diversify our business.
Speaker Change: Hawaii from purely a class III replaces this will be a J completed we've spoken about.
Speaker Change: Bringing your addressable market is online like Oregon State Lottery Canadian Vale trainees, Georgia Callahan IHA job. These are all straight.
Speaker Change: Rest of the markets that we can get into and take share inside that really is part of what you're seeing in terms of the ship share pretty much for our organization is elaborating out today's opportunities I think also importantly, the diversification across geographies you can see a really big order here for our UK business, which is a unique thing for us.
Speaker Change: So, making a big contribution to this quarter's guidance numbers also we'd go to market leadership position in Asia.
Speaker Change: Through the midpoint of November with the number one share provider in Australia.
Speaker Change: I think the U S class III replacement market is really important to the health of the industry, we see that being positive for us into 'twenty five, but we've worked really hard siobhan a nicer than the whole thing to diversify the business.
Speaker Change: Cross geographies across product lines across Adjacencies, I think that strategy is really coming to fruition at the moment.
Speaker Change: I think the second part of your question. It's been a curious one we've got a lot of dialogue about this with investors about what's driving the expansion in gaming ops in terms of the installed base in North America I think the logic, that's really driving that expansion is I think operators realize that their best players want to play the best guidance and it's kind of.
Speaker Change: False economics to constrain the amount, it's the best product on the floor to preserve cost when your best players want to play those games and so I think you're saying operators expanding the footprint of the highest performing guidance and I think thats driving their business forward, what do you say that my title.
What might be ticking up, but we think that's a net positive for the economics in the sector.
That's appreciate it thank you very much.
Speaker Change: You're welcome.
Speaker Change: Thank you. The next question goes to you by the hand delegate of Jargon Mohan. Please go ahead.
Speaker Change: Met all of.
Speaker Change: Good afternoon.
All the listeners on the call I was going to ask about cap allocation, but in the results just relates to provider to new places a garden types oppose.
Q4, EBITDA guidance and the introduction of it they've had I got it.
Speaker Change: Five.
Speaker Change: Can you clarify and confirm the Q4 or unpack the three moving parts associated with Q4, our EBITDA guidance and the motivation behind the new N Pert I got <unk> 25 place.
Speaker Change: Yes, Thanks Raj I appreciate the question so.
As I mentioned earlier, we're kind of working through the mitigation of strategic reviews. We knew there would be some near term impacts from a kind of a dragon train injunction perspective, and the team has just done as Matt said, an incredible job.
Working with our customers to assure we ring fence. The majority of the of the impact to 2024, and then we could turn the page.
Speaker Change: To not only execute our 2025 quarters, but how do we continue to build a foundation.
Speaker Change: For kind of to be kind of a compounded growth for years to come.
Speaker Change: Think about the Q4 specific impacts I think if you look at gaming, it's really in the North American gaming ops perspective, where we we hit some of the associated kind of conversion costs as well as some of the customer collaboration on commercial terms from an international point of view, we had some game sales.
Speaker Change: <unk>, especially in Australia that we're working through US we continue to fill that funnel as we head into 2025, I think outside of the gaming segment.
Speaker Change: I'll start with the social casino market that remains I would say the market remains relatively flat, but I think we have the best team in the <unk>.
Speaker Change: Interest rates continue to drive growth with that.
Speaker Change: The class product that we have and the monetization flywheel, we've put in place as well as added to GCC progress we've made quarter after quarter.
Speaker Change: I mentioned on the call. This was our 11th consecutive quarter of growth.
Speaker Change: Pacing the social casino segment, so we feel really good that Josh and the team will continue that progress as we had not only from a fourth quarter perspective, but into next year and then finally from a gaming point of view, we did have that slight headwinds.
Speaker Change: Kind of.
Second tired of talking about the termination fee, but Luckily. This is the last quarter that we'll talk about lease term fee. So we had $1 million termination fee last year as we cycle through that so next year it will be a cleaner comp, but if you look at the North American market that continues to grow at a very sizable pace and we're just really setting ourselves up for.
Speaker Change: The continued execution expertise. So all of these factors really contributed to what I would call modest EBITDA growth rate here in Q4, and then we'll kind of refocus ourselves to reinvigorate ourselves towards future growth.
Speaker Change: And then in terms of your second question I think from an <unk> point of view I figured you might appreciate that but we have kind of looked to kind of bolster our reporting costs include adjusted impact here over the last 12 or so months. This.
Speaker Change: This is really just simply.
Speaker Change: A translation of the one four EBITDA target. So this is a measure that's obviously widely used by our investor base, particularly in Australia. So we will start to incorporate not only the overall financial reporting of that pad, but obviously, we'll work to kind of the guidance framework as we move forward. So over the next let's say five quarters.
Speaker Change: What we've done is we've made some reasonable kind of assumptions based on the current forecast that team has provided and thats assumptions around floating interest rates tax rates.
Speaker Change: Investments in Capex that obviously will drive some variability in DNA assumptions. So I think the range that we provide then gives us a bit more variability or flexibility just given that this is a forecast.
Ashwin: This is what will start to kind of provide this translation ashwin.
Ashwin: Okay.
Speaker Change: That's excellent thanks, Matt Thanks Oliver.
Speaker Change: Yes, thanks Ralph.
Speaker Change: Thank you. The next question that you line at six <unk> of Craig Hallum, Brian. Please go ahead.
Speaker Change: Good afternoon. This is will on for Ian Thanks for taking our question just wanted to circle back to Dragon train quick.
Should we expect the second iteration of that and how do you feel about the pipeline going into 2025.
Speaker Change: Yeah.
Speaker Change: Yes, I'll start with the pipeline broadly like I said, we're a diverse organization with lots of Gaiam lots of franchises drag or try and was one of 130 <unk>.
We made over 1000 games in the last seven or eight years.
Speaker Change: That's what we do and what Youre investing in when you're investing a lot in Wanda has a platform.
Speaker Change: R&D organization that can continue to feel great guidance quarter after quarter across a diverse set of.
Speaker Change: Markets in a diverse set of franchises.
Speaker Change: Dragon trying to original was clearly again apply as wanted to flying customers worried about and that's what we're about building.
Speaker Change: What was contested and Dragon triangle is a very narrow part of the game.
Speaker Change: We're actively working on building a number of different very actually that dragon trying for the portfolio tip, our hand exactly to when we get to launch those games keep how quickly many of our competitors dialing debate. These coal side, we will pay back Howard's question about yes on that.
Speaker Change: But it is a franchise that will be in the market that competitors will have to compete with going forward.
Speaker Change: We are we say this is David.
Speaker Change: A franchise like dancing drums, like Huff and Puff like quick hits that will be a sustainable contributor to our organization over the long long term so youll see it back in the portfolio.
Speaker Change: In short order here and we're excited about that but just want to underscore. The fact that we're more than just drag and try and we are an organization that's decades old with lots of firepower when it comes to franchises and a strong lineup of games as we roll into 2025, and which is down at one $4 billion guide that we've given the marketplace.
Speaker Change: Many times over the last three years. So thanks for the question.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thanks, Matt.
Speaker Change: Yeah.
Speaker Change: Thank you. The next question does he Justin Barrett CL.
Speaker Change: Justin Please go ahead.
Speaker Change: Okay.
Speaker Change: Hi, guys. Thanks, very much for your time today and I just wanted to ask.
Speaker Change: About margins.
Speaker Change: Stick to your FY 'twenty five target how important is margin expansion.
Speaker Change: To that target and then look like I, just feel like I need to ask a question just around Dragon train and the progress on the litigation.
Speaker Change: In Australia is there any risk that you will need to.
Speaker Change: I guess remove the drag and trains that are already sold in Australia from the Florida as a result of that litigation progress.
Speaker Change: Yeah, Hey, Jonathan Thanks, Thanks for the question.
Speaker Change: I think from margin perspective, if you look at the the nature of our businesses across all three segments. It really does lend itself to having really robust margin performance quarter on quarter I don't think we've proven that and shown that over the last several quarters and this is for us and absolutely a key element for us in terms of creating value.
Speaker Change: And really if we look at the stability of those margins I think we can keep those current levels and really scale that over the next several years.
Speaker Change: We expect from gaming perspective, as we head into next year, we expect gaming to trend in line and that's obviously barring any significant product mix shifts, but we're going to continue to optimize the business for efficiency, while we continue to invest.
Speaker Change: Future growth of this business and we've done that over the last several quarters and we're going to continue to do that as we move forward. So over the long term, especially as we start to scale our gaming.
Speaker Change: Operations installed base over the long term, we expect that margin to expand I think from a from a side play point of view.
Speaker Change: We mentioned or talked about kind of UA spend.
Speaker Change: Our guide in the second half.
Speaker Change: Partially realized that in the quarter and we expect.
To kind of lean into UA, where it makes sense to see high returns, but I wouldn't necessarily expect any major shifts in kind of margin going forward, but as we head into next year and DTC continues to scale.
Speaker Change: There's no doubt that's going to be a margin tailwind for us for for many years to come and then I think lastly from an <unk> point of view.
I would expect that to kind of stay relatively consistent.
Speaker Change: First continue to invest in kind of the growth of this business and this business will scale over it over the next several years and I did mentioned kind of this impact of the termination fees. Once we kind of cycle over that for next year I think it will be a much cleaner greener compare for us. So I think all of that coupled with margin enhancement really gives us.
Speaker Change: Ability to do.
Speaker Change: Drive really significant margin growth here over the next several years.
Speaker Change: Yeah, I'll address the litigation question.
Speaker Change: Policy, we don't talk publicly about.
Speaker Change: Litigation, but what I will say specifically about your question to address it is.
Speaker Change: Guidance.
Speaker Change: Under the ownership with our customers this injunctions against lot and wonder not against any customer globally. So we don't see a scenario where those guidance.
Speaker Change: Our customers are impacted.
Speaker Change: Yeah, that's what we're kind of publicly about that.
Speaker Change: Thanks, guys I appreciate your responses.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you. The next question goes to Brian.
Speaker Change: Jim.
Speaker Change: Hey, Brian Han. Please go ahead.
Speaker Change: Good afternoon, Matt and Oliver and team. Thanks for the opportunity just one for me.
Speaker Change: The medium term growth outlook, you might have touched on it earlier, but I appreciate you've reiterated the $1 4 billion.
Speaker Change: EBITDA got into guidance.
Speaker Change: But after that once you've achieved that how would you describe the growth runway ahead across your businesses.
Speaker Change: Beyond that thank you.
Speaker Change: Yes, it's a key question, we get asked quite often.
Speaker Change: What's the future beyond 2025.
Speaker Change: Yes, it's difficult finish on it 2025.
Speaker Change: Transformation journey that extends well beyond 2025, obviously hadn't.
Speaker Change: We build a strategic plan that takes that business out.
Speaker Change: Another three to five years and say, we have visibility to the growth engine.
Speaker Change: In perpetuity.
Speaker Change: I am excited about the future of lot and wanted to beyond 2025, we think theres a significant amount of growth drivers.
Speaker Change: <unk>, we think there's more share to be had.
Speaker Change: And all of that global market.
Speaker Change: There are some adjacencies that we're just getting into.
Speaker Change: It's easy to say at the moment, we say a continuation of that importantly will likely come back to the investor by sometime next year and kind of reframe how to think about what you wanted to beyond 2025, it will be a growth story, but no doubt about that and we're excited to come back and share more details.
Speaker Change: About the specifics.
Speaker Change: And 2025 and at the moment, yes.
Focused on delivering on that guide and then setting this business up success beyond that but more to count.
Speaker Change: Thanks, Matt.
Speaker Change: Okay.
Speaker Change: Thank you and our final question goes to pool Nathan of Evans and partners. Please go ahead.
Nathan Evans: Thanks, Tim.
Nathan Evans: I just wanted to ask about sort of.
Nathan Evans: International outright sales opportunities as regulatory stuff, that's happening in Macau and I think in the Philippines and I believe there's like a.
Nathan Evans: Big expansion opportunity in the UAE coming up in a couple of years, but could you give us a bit of a color on sort of like the magnitude and timing of those sort of things and any other big events internationally, but that might be sort of helpful catalyst.
Nathan Evans: Yeah.
Nathan Evans: Yeah.
Nathan Evans: As I've said like so I think there's still.
Nathan Evans: The things we've spoken about pretty extensively that's a near term opportunity is playing out paid last year to active again into.
Nathan Evans: In 24 active again in 'twenty five there's some big ambitious plans for that market in terms of <unk> and then competing content on a global scale is a casino.
Nathan Evans: Operation.
Speaker Change: Pete participated that work, yes number one priority in the Philippines. The Macau regulatory change is going to happen on a number of is that that'll be a good opportunity for us again, it's pretty much a two horse race that market. These days I think they are actually for the five years, So I know that market well I'm very fond of that.
Speaker Change: It really rich Scranton and sitting on it that participated in that regulatory Chad and then beyond that there is some really exciting kind of new geo.
Speaker Change: Expanding the UAE.
Speaker Change: It's a very interesting one obviously wins losses, there now we're in the process of getting regulatory compliance.
Speaker Change: These new markets are quite interesting there like a bit of a rubik's cube trying to figure out which market. The fight is it going to be pulled from is it going to be a European player in Asian play out and I think that really lends itself to global operators like light and Wanda.
Speaker Change: Bring to bear an amazing set of content from guidance.
Speaker Change: From the UK from the European market from Asia from Australia from.
Speaker Change: All of the U S. So we can bring to bear that portfolio to help operators like Wynn and the ultimate losses in that market. They successful. So we're excited about trying to figure out that we're in.
Speaker Change: Q, but helping them along the way to be successful, but we say that is.
Speaker Change: Kind of a multi site expansion opportunity.
Speaker Change: Probably over the kind of 27 28 timeframe.
Speaker Change: So when we say that really coming to life.
Thailand.
Speaker Change: In the process of.
Speaker Change: With their expansion opportunities.
Pat on the horizon.
Speaker Change: Yeah. It really is unique set of opportunities coming online in the international market I think.
Speaker Change: We're very well positioned as a team we've got some great leadership in that market and the international markets to help propel us forward and get us set up for success.
Speaker Change: All of that to come back to Macau, and the Philippines more of a near term opportunity and then if you think about Thailand, Japan, UAE, probably more like 2007 and beyond so yeah, I think some meaningful catalysts on the horizon for the gaming business.
Speaker Change: Thanks, a lot.
Speaker Change: Okay.
Speaker Change: Thank you we have nice I had a question so I'll hand back to match for any closing comments.
Speaker Change: Thank you operator, before we wrap up I'd like to take a moment to reflect on the incredible feedback received at G. III. This year regarding our new products and initiatives. It was truly affirming to see the positive reception from our customers and industry latest further reinforcing abilene that we're on the right path towards innovation and growth we remain on track.
Speaker Change: To achieve that 2020 consolidated EBITDA target. Despite some challenges along the way our ability to stay focused execute and adapt is a testament to the strength and resiliency of the lot and want the time. Thank you again for your continued support on behalf of the entire lot and wanted to tell you. We're excited about the journey ahead and the milestones yet to come as we can continue creating.
Speaker Change: For all of our stakeholders.
Speaker Change: Hi.
Speaker Change: Yes.
Speaker Change: Thank you. This now concludes today's call. Thank you for joining you may now disconnect your lines.
Yeah.
Speaker Change: Thanks.