Q4 2024 Light & Wonder Inc Earnings Call
Speaker Change: Outstanding Journalist. Certified Author. A, Forbes Telegraph Insider. G, University of Chicago.
Thank you for watching!
Speaker Change: Welcome to Light and Wonder 2024 fourth quarter and full year earnings conference call.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If you'd like to queue for a question, you can do so by pressing star 1 on your telephone keypad. I'll now turn the call over to Nick Zangari, Senior Vice President of Investor Relations and Treasury.
Nick Zangari: Thank you, Operator, and welcome everyone to our fourth quarter and full year 2024 Earnings Conference Call.
Speaker Change: With me today are Matt Wilson, our President and CEO, and Oliver Chow, our CFO.
Speaker Change: During today's call, we will discuss our fourth quarter and full year results and operating performance, followed by a question and answer session.
Speaker Change: Today's call will contain four looking statements that may involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call.
Speaker Change: For information regarding these risks and uncertainties, please refer to our earnings materials relating to this call posted on our website and our filings with the SEC.
We will also discuss certain non-GAAP financial measures.
Speaker Change: 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.
Speaker Change: We will also discuss certain combined financial information, calculated as the historical results of the company, plus the preliminary unaudited historical results of Grover Charitable Gaming for the period stated, as well as run rate financial information.
Speaker Change: This information is for informational purposes only and does not purport to represent what the company's financial position and results of operations would have been if the transactions had occurred at specified dates or maybe in the future after giving effect to the acquisition.
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 Wilson: With that, I will now turn the call over to Matt.
Matt Wilson: Thanks Nick and hello everyone. Happy to have you on the call today.
Matt Wilson: 2024 was another year of significant progress here at Light and Wonder, as we once again achieved double-digit consolidated revenue and EBITDA growth year over year, with record revenues and profitability across all three businesses, cementing our commitment to deliver sustainable growth, underpinned by our differentiated strategy and product roadmap.
Matt Wilson: In fact, our team and product are stronger and better than ever, as evidenced by our consistent execution and focus on operational excellence.
Matt Wilson: highlighted by growth and share gains across the key segments of our business throughout the year. We will continue to focus on top and bottom line growth without compromising investments for future growth.
Matt Wilson: As we shared last week, we have reached a definitive agreement to acquire Grover Gaming's charitable gaming business.
for an upfront purchase price of $850 million.
Matt Wilson: equating to a multiple of 7.7 times Grover Adjusted EBITDA for 2024 and a 7.1 times multiple based on Grover Run Rate Adjusted EBITDA, with the purchase multiple expected to only further be reduced if we achieve the up to $200 million earn-out provision in the agreement.
Speaker Change: Charitable gaming is a form of regulated gaming where a portion of the proceeds are given to charity. This is a compelling market with high barriers to entry providing a formidable competitive advantage while benefiting worthy causes.
Speaker Change: Grover is one of the leading suppliers in charitable gaming with an attractive financial profile, strong customer relationship and an appealing growth outlook.
Speaker Change: We value the enviable economics of our installed-based business and will continue to invest organically and inorganically to further expand the fleet. Grover has an attractive recurring revenue model with a loyal and sticky customer base that is core to our strategy.
Speaker Change: This will be the newest adjacency where we intend to deploy our robust R&D engine and more broadly distribute our variety of hit franchises and games, along with creating further expected synergies.
Speaker Change: Grover has over 10,000 stall basins and has deployed over 1,500 locations in five states.
Speaker Change: This presents a compelling opportunity to further enhance our cross-platform offering and more broadly diversify our operations with a quality complementary business that will allow us to distribute our proven content across wider customer and player segments where we are currently not represented in North America.
Speaker Change: With that, I'd like to turn our attention back to the operational highlights, noting that we executed and delivered on the year-on-year consolidated EBITDA growth guidance we provided last quarter.
Speaker Change: Gaming continues to deliver exceptional results, demonstrating strong growth from our broad array of franchises and well-rounded gaming portfolio.
Speaker Change: Throughout the year we've made significant progress in expanding our installed base footprint.
Speaker Change: During the quarter we added more than 850 units in North America on a sequential basis.
Speaker Change: mark in the 18th consecutive quarter of premium installed base growth which continues to be north of 50% of the total North American installed base.
Speaker Change: Importantly, we demonstrated the ability to not only preserve the impact of Dragon Train Fleet, but also put up strong numbers more broadly and in other segments outside of premium, such as Class 2, among others. In fact, we indexed 11 of the top 25 new premium leased and WAC games in Islay's most recent Game Performance Report.
Speaker Change: As mentioned in our prior earnings call, North American revenue per day would be impacted in the fourth quarter.
Speaker Change: However, we are seeing strong performance out of the gate from Hup and even more Hardhat, which was deployed on the Cascada dual screen cabinet and is now indexing well above the game it largely replaced on a same store basis in many key markets.
Speaker Change: This reflects the team's dedication to build great franchise extensions, and we expect to do the same across all of our brands. I'm encouraged and expect gaming operations to return to normalised growth in 2025, underpinned by the robust roadmap we have in place.
Speaker Change: Another key highlight for the year is the leaps and bounds progress we've made in game sales, with expansion into new adjacencies including Oregon State and Canadian Video Lottery Turnover, and continued momentum internationally.
Speaker Change: In North America, we held number one ship share in both the second and third quarters, continuing the momentum in the fourth quarter with year-over-year growth in North American replacement units.
Speaker Change: In fact, we continue to hold number one position in the fourth quarter according to ILA's newly released US and Canada Cabinet Sales and Lease Report.
Speaker Change: Similarly, we continue to maintain the traction we gained in Australia as the number one ship share supplier in 2024, our first year for Light and Wander, as we continue to broaden our international presence with a wide range of upcoming opportunities.
Speaker Change: As one of the leading end-to-end gaming solutions provider, we have an equally attractive systems and table products portfolio, which further enhance our offerings to operator partners to serve and optimise casino floors.
Speaker Change: In addition to our industry-leading casino management systems and hardware, we've also bolstered our software capabilities through innovation and partnership, which led to over $300 million in systems revenue for the year, a 13% increase year-over-year.
Speaker Change: The ability to execute our gaming strategy continues to be a key driver of our success in share game. In fact, the power of our franchises in global scale gives me confidence that we can continue to grow the business sustainably in the near future, given the many opportunities on the horizon.
Speaker Change: On to CyPlay, where it was another record-breaking year on several fronts as the business surpassed $820 million in revenue, underpinned by healthy engagement and monetisation.
Speaker Change: Our four largest games all delivered record revenues for the year, with Quick Hit and 88 Fortunes continuing that trend in the fourth quarter.
Speaker Change: Since Light and Wonders buyout of SciPlay in late 2023, our social consenter business has outpaced the broader market, extending its run of outperformance over the past two years.
Speaker Change: During this stretch, we refined the Cyclay engine, enhanced the monetization blueprint diligently to align with our growth trajectory.
Speaker Change: Throughout the course of the year, we've also crafted a viable path to prudently grow our direct-to-consumer platform sustainably. I'm happy to share that we grew DTC to over 13% of revenue in the quarter as we continue to roll out this offering in phases, and eventually to the games that don't currently offer the DTC platform.
Speaker Change: Monetisation continues to be a key focus, driving record levels of average revenue per daily active user and average monthly revenue per paying user for the quarter and the year end.
Speaker Change: ARPDAU is trending steadily over $1 as projected, requesting a shift towards engaging higher quality payers.
Speaker Change: Importantly, we are committed to maintaining the momentum of our flywheel and continue to give the team the opportunity to engage in prudent incremental user acquisition spend as you will likely see sequentially in the first quarter where we typically see better returns versus higher acquisition costs around the holidays.
Speaker Change: SciPlay continues to be a vital piece of our cross-platform strategy as we focus on the pollination of key learning across the businesses.
Speaker Change: We are constantly evolving the engaging features our platform has to offer. Our team has done a great job of staying nimble and adapted to changing player dynamics.
Speaker Change: One of our biggest strengths lies with the real-time feedback that we get from our various LiveOps and Metagame deployments to test the viability of these features, which has been a major contributor to our outperformance over the past two years.
Speaker Change: On rare occasions, the end result of these trials did not meet our internal expectations, as we experienced with Jackpot Party in the quarter. However, the valuable insight that we gained during the process enables us to share these findings across our games to optimise the portfolio.
Speaker Change: Overall, I'm pleased with the execution of the team and expect to see healthy growth in 2025 as we execute on the different phases of our strategic initiative.
Thank you very much.
Speaker Change: Turning to iGaming, where Light and Wonder's proven OGS content aggregator and the North American market continue to expand and grow to record GDR volumes in the quarter and 2024.
Speaker Change: Our strategy is simple yet effective, and that is to leverage our experience and aggregation platform to offer content studios and operator partners on our network the ability to scale meaningfully alongside our best-in-class first-party content.
Speaker Change: In fact, we executed a plan with several key launchers and released over a thousand games on the OGS, surpassing this milestone for the first time in 2024.
Speaker Change: Most recently, we launched our chart-topping Huff & More Puff game with FanDuel across North America, our best ever game release, expanding the omni-channel releases of our producing franchises as the brand continues to gain momentum and exposure in both the land-based and digital markets.
Speaker Change: We plan on the continued proliferation of our R&D engine across the digital domain on our content-first strategy, with accelerating releases of first-party content in the future.
Speaker Change: Lightning Box continues its run with strong launchers from the Thundering Series and Eglint, with 35% year-over-year GGR growth in the quarter.
Speaker Change: We also launched Rainbow Rich's Dream Pots, a wide-area progressive jackpot game, into the UK market as we continue to focus on driving further success of market-attuned game content development.
Speaker Change: Additionally, we expanded our adjacent offering of the first cross-platform marketing jackpot product, Super Kenya, which launched in Quebec with Wonder Drops, another new marketing jackpot offering which spans across 20 first-party content games with Penn in Michigan.
Speaker Change: Separately, following a thorough strategic review, we've made the decision to discontinue and divest our live casino business.
Speaker Change: This reflects our commitment to allocating resources to the most impactful parts of the business where we have good line of sight to meaningful returns on our investment.
Speaker Change: While we're still in the relatively early days of investing in the business, we strive to stay nimble as an organisation and are thus focusing on the risk reward profile of our other businesses which have better visibility to superior returns relative to live casinos.
Speaker Change: You may have seen our recent announcement that we've appointed Simon Johnson to lead the iGaming business. His extensive experience as a seasoned gaming executive and most recently as the Managing Director of our international gaming business offers us a fresh perspective on our iGaming operations and strategies.
Speaker Change: Simon's familiarity with the fragmented yet growing global gaming market provides us with insights to help devise regionalised plans for both mature and emerging markets. This includes Brazil, where iGaming was recently legalised.
Speaker Change: As I reflect upon 2024, the R&D investments that we've made were vital to the success and share gains of our business.
Speaker Change: Importantly, we continue to build our talent pool, adding more designers and expanding our studios as we onboard with key hires in North America and Australia.
Speaker Change: Our bench strength is a key differentiator, as we were able to fill key executive roles from within the company. To that extent, I'd also like to congratulate Nathan Drain on his promotion to Chief Product Officer of Light and Wonder.
Speaker Change: Nikon is a tremendous asset to the company and a great leader for our critical R&D functions.
Speaker Change: He has a clear and robust content roadmap and will ensure our continued success, positioning us for growth in the near and long term.
Speaker Change: Additionally, Rich Schneider will move into the role of Senior Advisor to the business. Rich was instrumental in orchestrating the product roadmap and R&D structure at Light and Wonder during the transformational years and I'm very excited for us to continue on this growth journey together.
Speaker Change: Importantly, Nathan's appointment to manage the global product portfolio across all segments will further enhance our cross-platform strategy, enabling continuous integration of our content to drive efficiency and enhancement to the quality of our offerings.
Speaker Change: Our R&D engine will be further amplified, driving sustainable growth through our businesses, including charitable gaming, generating outsized returns on our investments.
Speaker Change: In summary, our execution and performance last year gives me great confidence in achieving our targets. I want to thank our team, the board and our shareholders for their unwavering support as we kick off 2025.
Speaker Change: We are fortunate to have a very supportive shareholder base that embraces our vision as a global games company.
Speaker Change: As we approach the second anniversary of our successful secondary listing on the ASX, with ongoing collaboration with our global shareholders, we are continuing to explore ways to refine our US and Australian capital structure.
Speaker Change: The company remains focused on enhancing the liquidity and market capitalization of its ASX listing.
Speaker Change: and as part of this we'll be considering a dual primary or a sole listing on the ASX. Accordingly, we've engaged advisors to evaluate potential strategies to achieve this objective and we'll be seeking feedback from key stakeholders to ensure an optimum outcome for Light and Wonder shareholders.
Speaker Change: With that, I'll turn it over to Oliver to go through the financials.
Oliver Chow: Thanks, Matt. Glad to be here today with you all to share our fourth quarter and full year 2024 results.
Speaker Change: The performance we delivered reflects the sound financial and operational foundation that we have built, and the execution prowess we pride ourselves on as we experience a fourth straight year of double-digit consolidated AIPDA growth.
Speaker Change: The fourth quarter also represented the 15th consecutive period of year-over-year consolidated revenue growth as we continue to execute on our key initiatives.
Speaker Change: Consolidated revenue for the year was $3.2 billion, a 10% increase from the prior year period on strong performance across our business units.
Speaker Change: Fourth quarter consolidated revenue was seven hundred and ninety seven million dollars of four percent year-over-year driving outperformance to the consolidated AIBDA guidance we previewed on the last earnings call.
Speaker Change: Full year operating income was $668 million, a 29% increase year-over-year, primarily on higher revenue.
Speaker Change: Fourth quarter operating income grew 8% to $168 million, translating into a diluted net income per share of $1.20 for the quarter, up from the $0.73 in the prior year period.
Speaker Change: Similarly, we saw strong growth in the four-year period as diluted net income per share more than doubled from $1.75 in 2023 to $3.68 in 2024.
Speaker Change: Consolidated AIPDA for 2024 was $1.24 billion, an 11% increase from 2023.
Speaker Change: Of this, $315 million came in the fourth quarter, a 4% increase compared to the prior period and above the low single-digit year-over-year growth previewed last quarter.
Speaker Change: Adjusted MPAT-A for 2024 totaled 480 million dollars, representing a full year growth rate of 24 percent.
Speaker Change: The fourth quarter contributed $127 million to this result, as we track positively towards our 2025 targeted adjusted MPAT-A range.
Speaker Change: Operating cash flow for the full year was six hundred and thirty two million dollars with the quarter generating two hundred and two million dollars.
Speaker Change: The fourth quarter results was driven by an increase in earnings and favorable changes in working capital.
Thank you.
Speaker Change: As we close the chapter on another exceptional year for Light and Wonder, we are executing towards our consolidated AEPA target of $1.4 billion.
Speaker Change: with focus and planning centered around future financial and operational success as we continue to be a compounder of growth for years to come.
Turning to the business units.
Speaker Change: In gaming, revenue in the quarter was $515 million, an increase of 4% year over year, primarily led by systems growth of 24%.
Speaker Change: Table products and gaming operations also grew 10% and 4% respectively, highlighting the strength of our overall portfolio.
Thank you.
Speaker Change: AYIPTA was up 5% to $257 million on revenue growth and AYIPTA margin expansion with margins of 100 basis points year over year to 50% in the quarter.
Speaker Change: as we continue to focus on business optimization initiatives while investing for future growth.
Speaker Change: Importantly, we deliver 12% year-on-year annual growth in both revenue and AEBDAS and expect this momentum to continue in the new year.
Speaker Change: We made significant strides in gaming operations given the quality of our product offering and ended the year with over 34,000 install-based units in North America.
with approximately 2,800 units added throughout the year.
Speaker Change: Overall, North America revenue per day grew 2% for the year, with impact from the injunction largely confined to the fourth quarter as discussed.
demonstrating the power and diversity of our global game franchises.
Thank you.
Speaker Change: Global gaming machine sales were $195 million in the quarter on continued North America momentum, with unit shipment up 25% year-over-year in the quarter, as we further capitalized on the coveted number one ship share position in North America that we've held over the prior two quarters.
Speaker Change: For the year, we delivered $865 million in revenue on over 43,600 unit sales, an increase of 16% in unit shift globally compared to the prior year.
Speaker Change: Additionally, the quality of our offering remains strong as our cabinets continue to command a healthy average sales price of approximately $18,400 both in the quarter and for the year.
Thank you for watching!
Speaker Change: Systems realized $88 million of revenue in the quarter, which contributed to the full-year revenue of $302 million.
Speaker Change: These are 24% and 13% increases compared to their respective prior year periods on healthy market demand for our hardware and software services, evidenced by a number of landmark contracts signed in the year.
Speaker Change: Separately, Tables delivered a 10% revenue gain in the quarter to $57 million on timing of utility sales in North America and Asia.
Speaker Change: We continue to maintain our market leading position in the business with 211 million dollars in four-year revenue as we progress on innovations with the enhanced product offerings in this segment.
Speaker Change: Our gaming performance truly illustrates the breadth and depth of our product portfolio, an embodiment of the returns that we're seeing from continued investments in CapEx and R&D, as we expect to return to normalized above-market growth levels in 2025.
Speaker Change: where we expect meaningful game sales opportunities scaling throughout the year as compared to 2024 where we had concentrated new and expansion sales in the first quarter in Asia.
Speaker Change: Moving on to CyPlay, full year revenue grew 6% to $821 million, of which $204 million was realized in the fourth quarter, underpinned by a diverse portfolio supported by our advanced CyPlay engine.
Speaker Change: A Yipida increased 7% year-over-year to a record $74 million with margin increasing by 200 basis points to 36% in the quarter.
Speaker Change: This was largely driven by strategic user acquisition spend and the expansion of our direct-to-consumer platform.
Speaker Change: Our continued focus on a refined UA strategy and phased DTC deployment throughout the year enabled us to deliver 272 million dollars in AEFIDA for the year, an increase of 12% compared to the prior period.
Thank you for watching!
Speaker Change: The commitment to scaling the business in a measured manner has proven beneficial as reflected in our various monetization metrics.
Speaker Change: Average revenue per daily active user grew 6% year-over-year to a record $1.06 in the quarter.
Speaker Change: and average monthly revenue per paying user scaled 3% to just over $117.
Speaker Change: Furthermore, payer conversion increased at 10.9% as we continue to focus on payer monetization.
Speaker Change: The quarters trend mirrors the full-year momentum of KPIs, where we grew average revenue per daily active user by 11 percent.
Speaker Change: and average monthly revenue per paying user by 10% against 2023.
Thank you for watching!
Speaker Change: Side place outperformance can be largely attributed to the investments we've made in the business.
Speaker Change: Whether it's a site play engine, DTC, talent, or UA spend, our team continues to execute at a high level and to further enhance the monetization flywheel.
sustainably over time.
Speaker Change: This, along with our upcoming game rollouts, are expected to provide ample runway for growth and profitability, and expect CyPlay to further contribute and deliver considerable value to the cross-platform ecosystem that we have fostered here at Light & Wonder.
Speaker Change: Turning to iGaming, revenue grew 11% year-over-year to $78 million in the quarter and AEPDA increased 9% to $25 million compared to the prior year period on 32% AEPDA margin.
Thank you.
Speaker Change: This was driven by continued momentum in North America and Europe, as well as strong content launches.
Speaker Change: Full-year revenue was up 9% to $299 million, and a YIPPDA was up 3% to $98 million.
Speaker Change: Revenue and AEPA dog growth were impacted by 2% and 6% respectively, factoring the breakage fees that were recognized in the second through fourth quarters of 2023, which amounted to $6 million in total flowing through to the bottom line.
Thank you for watching!
Speaker Change: More broadly, we saw the best-ever quarter of US TGR growth of 30% against the prior year.
Speaker Change: Importantly, in the iGaming business, we are focusing on high return initiatives with a strong growth trajectory across the industry and on our OGS.
Speaker Change: Our planned divestiture of Live Casino was a decision to allow for the reallocation of resources to other parts of the business.
Speaker Change: supported by strategic reviews that are conducted consistently across the enterprise to maximize our return on investments.
Speaker Change: Given we were in the investment stage of this business, we expect to see modest uplift in AEPA dub due to the discontinuing of these operations.
Thank you.
Speaker Change: This decision reflects the rigor with which we make capital allocation decisions and the willingness of our team to be objective in our decision-making to create the best long-term outcome for our shareholders.
Speaker Change: As we focus the business on our content and aggregator offerings going forward, our scale, best-in-class first party, and digital native content will be critical to our success.
Speaker Change: With Nathan leading our global product portfolio, we can further develop cohesive strategies and content roadmaps to serve existing markets and new jurisdictions as they come online.
Speaker Change: For example, with the market opening in Brazil, we launched approximately 50 game titles with a range of operators, of which more than half are digital native offerings.
Thank you for watching!
Speaker Change: Overall, we are pleased with how iGaming has progressed through 2024 and see compelling value as we're excited to bring more first-party content to consumers.
Speaker Change: further ingraining the business in a cross-platform strategy, which is supported by strong market tailwinds and the expectation of a wide range of compelling global growth opportunities for many years to come.
Thank you for watching!
Speaker Change: Our priorities remain the same as we continue on this growth journey that you've seen over the past two plus years.
Speaker Change: Our strategy to optimize growth, competitiveness, and profitability to maximize the performance of our company remains intact.
Speaker Change: Through a focus on operational excellence, we have seen continuous improvement across the business and identified ways to refine operational processes through shared services and right-shoring of resources, which has improved productivity across the organization.
Speaker Change: In fact, our philosophy to think and act like owners is widely adopted across the company as we extensively review processes, capabilities, and vendor contracts that are critical to the business and proactively optimize our supply chain through the changing market conditions.
Speaker Change: This culture of accountability has resonated across the organization and is deeply rooted in our planning processes.
Speaker Change: enabling us to stay nimble and retain flexibility to navigate dynamic environments driving positive outcomes.
Speaker Change: We will continue to reinvest back into the business, which as a content-driven company is all about the games that we develop, all while staying committed to margin preservation expansion, driving sustainable long-term profitability through value-enhancing initiatives.
Speaker Change: Our balance sheet is now one of the key assets Light and Wonder is equipped with to take the business to the next level.
Speaker Change: With a net debt leverage ratio of three times the end of the year, we are staying nimble and within our targeted range of two and a half and three and a half times to capitalize on opportunities for further value creation.
Speaker Change: Additionally, our liquidity profile was further enhanced with a recent extension, repricing, and expansion of a revolver from $750 million to $1 billion.
Speaker Change: allowing further flexibility in capital allocation as we prepare for continued growth at Light & Wonder.
Speaker Change: As you will have seen in our release, we have settled and agreed to pay $72.5 million to resolve the TCS Huxley antitrust claims filed in 2019 related to our automatic card shuffler business.
Speaker Change: as we put this legacy litigation behind us and focus on delivering on our strategic priorities.
Speaker Change: Free cash flow was $74 million in the quarter and $318 million for the year, reflective of our strong earnings, partially offset by changes in working capital and higher capital expenditures.
Speaker Change: We are in a very fortunate position where our products are in high demand and our teams are diligent on balancing the long-term economics of business with strong momentum which requires upfront investments on high return success-based capital expenditures and leveraging working capital for compelling sizable orders.
Speaker Change: Ultimately, we expect these uses of working capital and capital expenditures to drive growth and long-term free cash flow generation into the future.
Speaker Change: Overall, as we continue to focus on business optimization and operational excellence,
Speaker Change: We expect to generate incremental free cash flow to fuel our capital allocation priorities.
Speaker Change: We will continue to invest in our core capabilities to support leadership positions across the business with a commitment to driving high ROI, which exceeds our return thresholds.
Speaker Change: A great example where conviction is high is in the charitable gaming space.
Speaker Change: The Grover acquisition is highly complementary to our core businesses, and we expect this to be a high single-digit accretive acquisition on an adjusted MPA basis in the first full calendar year of L&W ownership in 2026.
Speaker Change: with synergies to be realized as we develop and integrate the business over time.
We expect to move quickly.
Speaker Change: And we'll look to close the Grover acquisition during the second quarter of 2025, subject to customary closing conditions.
Speaker Change: This transaction is expected to be funded primarily with debt, with pro forma net leverage expected to stay within our target range.
Speaker Change: Separately, we continue to be opportunistic as we see value dislocations in the market with regards to share of purchases.
Speaker Change: We bought back a total of $462 million of shares during 2024.
Speaker Change: with $243 million occurring in the fourth quarter as we saw value creation opportunity with the program during the period.
Speaker Change: We are committed to returning capital to shareholders through our $1 billion dollar program, continuing in an opportunistic manner and in the context of a healthy balance sheet.
Speaker Change: As we move into 2025, I anticipate a return to normalized growth underpinned by our execution on commercial strategy and robust product roadmap.
Speaker Change: Our team continues to deliver exciting, engaging new games, utilizing the latest technologies, and creating exceptional customer experience.
Speaker Change: Based on the timing dynamics of game sales and high return investment opportunities in CyPlay's UA spend discussed earlier, we expect first quarter year-over-year consolidated AIPDA growth to be in the low double digits.
Speaker Change: noting that our continued investments will drive enhanced organic growth as the year progresses. With that, we'll turn it over to the operator for your questions.
Thank you.
Speaker Change: Great. If you'd like to queue for a question, you can do so by pressing star 1 on your telephone keypad.
Speaker Change: If for any reason you'd like to remove your question at star two, but again to join the question queue, please press star one
Operator: Our first question will be from Barry Jonas with Truist. Your line is now open.
Thank you for watching!
Barry Jonas: Hey guys, thanks for taking my question. As we enter the year where you've got it to hit 1.4 billion in EBITDA, can you talk through how you see the cadence in getting there this year? Thank you.
Thank you. Bye-bye.
Thank you.
Barry Jonas: Yeah, thank you Barry. I think a really solid 2024 campaign. Proud of what the team's achieved throughout 2024 and we've got good momentum leading into 2025 so I feel encouraged about that.
Respect and meaningful.
Speaker Change: second-half replacements and new opening opportunities in markets where we have leadership positions in. So that's in Europe, that's in Asia, as well as kind of healthy North American replacement trends as we continue to also proliferate into adjacent markets. I think from a side play point of view, you know, we expect to continue to leverage the side play engine and we further
Speaker Change: scale not only our largest games, but also introducing and scaling organic new games in this space, and they've shown very promising KPIs thus far. I'm really excited about what that means for us from a long-term growth perspective. We'll also lean into UA, an incremental UA here, especially in the first half.
Speaker Change: just high ROAS return on ad spend capabilities for us as well as DTC expansion that's going to contribute growth for us well beyond Q1.
Speaker Change: In terms of iGaming, you know, we see continued expansion in global markets, particularly here in North America. We see states that have been legalized for over a decade now still driving significant growth. So we see plenty of tailwinds from that point of view. But also, you know, the investments that we've made in this R&D engine really driving our 1PP content execution, that's going to be supported by the market tailwinds that we see.
of
Speaker Change: We see a clear line of sight to the 1.4 to Matt's point, and then Grover will be accretive to the 1.4 Day one at both the EBITDA and the cash flow perspective. So yeah, we feel pretty pretty convicted on the 1.4
Thank you for watching!
Perfect. Thank you so much, guys. Appreciate it. Thanks, Greg.
Thank you.
Speaker Change: Our next question is from Matt Ryan with Baron Joey. Your line is now open.
Thank you for watching!
Matt Ryan: Thank you. I just had a question on gaming ops. We saw some really strong additions in Q4 and I think we're seeing some pretty good numbers from
Matt Ryan: some of your newer releases, Monopoly Express and Hard Hat Edition. I'm just trying to think about how we think that install base might change in Q1 in light of some of the conversions that you might be seeing on the Cascada dual screen and also that strength that's coming through from new product.
Bye.
Yeah, hey Matt.
Matt Ryan: Really proud of the gaming team's ability to maintain that ex-Dragontrain fleet in the fourth quarter and add so many additional gaming ops units I think it was really one of the outstanding highlights
Matt Ryan: of the quarter amidst that headwind and the drama that we had to manage through, they were able to put up a fantastic set of results. I think what you'll see as we get back into Q1 is you'll see the fee degradation that you saw in Q4 because of the drag and train impact really reverse itself. So you'll see that fee per day coming back strongly in the first quarter and throughout the year. I think this again is a real testament to the teams really mitigating the drag and train situation very effectively. The way I like to think about that situation now
employees across the globe.
Matt Ryan: 6,995 of them are thinking about the future, operating the business.
building great games.
Matt Ryan: and really servicing our customers. There's a handful of us that are thinking about this Dragontrend situation now which is largely behind us and almost completely behind us from an operating perspective. So feeling good about that. I think the lineup leading into 2025 is completely stacked. We're just scaling a new cabinet in Cosmic Upright at the moment, going out in good volumes with all of our brands we're really leaning into. So a new Dancing Drums game, a new Invaders of Planet Moolah game, more Huff and Puff games. We've got a Wizard of Oz game coming back.
Matt Ryan: and customers want to buy. So we're just leaning into the really obvious brand extension. So I think you'll see good sequential momentum in gaming as we move throughout the year. Oliver, anything you'd add or subtract? No, I think that's exactly right. And to your point, from an RPG perspective, I expect that to scale nicely here through the year, which will obviously give us tailwinds well beyond 2025 and help us
Matt Ryan: sustain growth well past that. So yeah, we're excited to also share some updates in May at our investor event.
Thank you.
Thanks, guys.
Thank you very much.
Thank you very much.
Speaker Change: We have a question from Chad Baynon with Macquarie. Your line is now open.
Chad Baynon: Hi, good afternoon. Thanks for taking my question. I wanted to ask a two-parter on margin. So the first part on Q4 margin for the gaming segment.
Nice growth year-over-year, wondering if you could...
talk about that in terms of
Chad Baynon: if the growth came from mix or controllables that you made within the organization.
Chad Baynon: And then the segue from that is for 25, given some of the decisions that you made around live dealer and cost containment comments in the past, how are you thinking about margins overall for the company in 25? Thanks.
Speaker Change: Yeah, thanks Chad. Appreciate the question. I think from a gaming perspective, if you actually look at it broadly from a total business point of view, we've been scaling margins here quite nicely quarter after quarter over the last several years. We expected, even with some of the CRPD impacts that Matt mentioned earlier from a gaming ops perspective, we're able through margin enhancement initiatives, through just the great work that our manufacturing teams have done over the last couple of years.
Speaker Change: years to put us in position to be able to scale margin through, you know, any type of
Speaker Change: headwinds that we face from a business perspective. So long-term I expect gaming to continue down this path just given the work and the initiatives that we've put forth and really across the board we see from CyPlay, from iGaming, just multiple opportunities for us to continue to drive margin uplift. So whether that's incremental UA spend offset by the DTC initiatives that we've we put forward, that's going to provide margin tailwinds for us.
Speaker Change: You kind of touched on live casino on the iGaming side. That's expected from an iGaming perspective to drive positively here over the year. But more importantly, I think, outside of the modest uplift that you'll see from a live casino perspective, it's really supported by just the increasing volume and the 1pp content that we're bringing to the market here. And so that's going to be able to help us sustain, again, margin increases here over time.
Matt Ryan: You know, Mike Larelli and the team, they're still working through a plethora of opportunities for us. We've got years of runway here in terms of margin expansion, but I don't know, Matt, if there's anything else I might have missed.
Matt Ryan: No, probably worth us touching on the live casino decision more directly, so after a thorough strategic review.
Matt Ryan: we identified there's been some changes to kind of the operator and supply dynamics in that category which has resulted in some degradation in pricing so we made the decision to divest of that set of assets and kind of refocus the business to higher ROI investments I think it's a example of you know these strategies aren't set and forget we review them periodically and just make sure they're working for us and we made the decision to divest and just focus on areas that we can see clear a line of sight
Thank you for watching!
Thank you both. Appreciate it.
Thank you for watching!
Speaker Change: We have a question from Andre Fraumier with UBS. Your line is now open.
Thank you.
Andre Fraumier: Thank you. Just a question or sort of a two-part question around the drivers of your iGaming growth and outlook. You know, you talked about Puff and Puff being your most successful launch into iGaming. I just wonder how you think about the
Andre Fraumier: the game pipeline into that channel and how you trade that off against impacts it might be having on the land-based business as you grow those franchises. And then just wondering if you could comment on any new...
Feedback you've got on potential legalization further in the US
Thank you for watching!
Andre Fraumier: Yeah, thanks for your question. Yeah, so Huff & Puff just launched in January into the iGaming channel. It's really ten years after we launched the first iteration of that game and probably five years after we launched kind of the latest incarnation of Huff & Puff, and we've launched several beyond that. I think this really illustrated the sense that we can tighten up the cadence of releases across LAN-based and iGaming. This was kind of one of the catalysts for us to shift to a new operating model around R&D.
Andre Fraumier: So you see Nathan Drain now leading all content for all channels going forward. So he's stood up a content leadership team, so the content creators across iGaming, Cyplay, Lambase and eventually Grovart will all be part of the same organization which will really look to streamline the releases, the focus, leverage the data and just be more efficient about the way we deploy our R&D resources.
Andre Fraumier: So we feel like we've set up for success this year. We're going to launch a range of Huff and Puff games in iGaming. Content is king or queen, as we like to say around here, in all these categories. So the quality of our games will drive the success of iGaming.
Andre Fraumier: over the long time horizon, I would say on the iGaming legalisation path
Andre Fraumier: We've learnt over the years to control the controllables, and legalisation across states is a crystal ball type event, and we've all got different variations of a crystal ball. So we don't see legalisation happening in 25 in any US states. Lots of discussion.
Andre Fraumier: in certain markets about potential for new legalization of states in 26 and beyond, but we're not really building anything into our plans from a legalization standpoint. Really what we can control is the quality and the cadence of our releases and just to position ourselves for expansion when it comes and we'll be ready for that.
Thank you for watching!
Great, thank you.
Speaker Change: We have a question from David Katz with Jeffries. Your line is now open.
Thank you for watching!
Good evening, everyone.
Speaker Change: Oliver, can you give us just a little bit of color around, you know, we got the EBITDA, right, but there's a lot of sort of moving parts within the business and expected acquisition. How do we think about growth in, you know, cash flow, either on an operating basis or free cash flow? You know, how do you think about those rolling forward the next year or two in the model?
Speaker Change: Yeah, thanks, David. How are you? Good to see you. Good to hear from you. With the free cash flow continues to be a key focus for Light and Wonder in terms of long-term value creation, you know, obviously there's going to be some kind of seasonal factors that play into kind of the quarter-to-quarter movements that we've we've kind of talked about, but, you know, as of today, a couple things that I just want to kind of reemphasize is really the investments that we're making in terms of CapEx, so Succex-based CapEx,
We spent, just to give you context, over $52 million.
Speaker Change: year-over-year in terms of incremental CapEx to fuel our gaming ops install base. We're going to continue to lean in that as we see that as a long-term free cash flow yielder for us over time. The other component is these long-term financing deals.
Speaker Change: We will continue to look at opportunities, especially with our international customers. Customers like Antane, Patcor, you know, etc. that we called out here over the last couple of quarters. This not only gives us an opportunity to further build relationships with these quality customers that can then build incremental business over time. So being able to leverage some of our working capital here in this space gives us, I believe, long-term benefit from a cash flow perspective.
Speaker Change: Grover, and what we're really excited about is this is yet yet another business that has high margins high cash flow and Really that's going to enable us to not only stay within the targeted two and a half three and a half range So we have some capital allocation perspective But really start to drive incremental cash flow for us to then
Speaker Change: put that back into the business as we see fit or, you know, obviously do other capital allocation strategies that we have. So really the optionality remains here for us even post this acquisition and really puts us in a great position as we as we look towards the next couple of years.
That's all I need. Thanks.
Thanks, David.
Speaker Change: Our next question is from Rohan Gallagher with Jarden. Your line is now open.
Rohan Gallagher: Thank you. Matt, Oliver, good afternoon. Hello everyone. With respect to iGaming in FY24, you obviously had payments that you had to make to third parties.
in terms of exits, and then also...
Speaker Change: You've been investing in Live Casino, if you were normalising that to set up a base for growth in FY25, what sort of impact would that be, and associated with that, with the decision to exit Live Casino, what sort of addressable market reduction do you see as a result of that strategic decision place?
Thank you for watching!
Thank you.
Speaker Change: Yeah, so thanks, Rowan. Good to hear from you. I think the breakage fees that you kind of mentioned, I'm happy that this will be the last quarter that we have to kind of speak about those kind of year-over-year compares. I think, you know, if you kind of normalize that out, we would have been double digits, close to double digits on both top and bottom line from an iGaming perspective. And so I think as we move forward from there, it would be a clean compare overall.
of just broader impacts to kind of addressable market.
Speaker Change: I don't see that being impactful really at the end of the day, so I don't know if that's...
Speaker Change: and our core competencies is where we're focusing the iGaming business to go forward.
Speaker Change: I appreciate that and if I'm just a bit cheeky to ask a follow-up question obviously the supply chain under Anthony Somani has done a fantastic job here in Australia the only certainty is uncertainty around tariffs and steel etc. What are your early indications around supply chain potential challenges not just for the industry but for your good self?
Thank you
Speaker Change: Yeah, thanks, Rowan. Yeah, so this will absolutely be a very fluid and dynamic kind of situation here over the coming potentially days, weeks, months, etc. I think, you know, we've done, you know, Anthony and the team have done just an incredible job here over the last couple of years of really diversifying our supply chain and putting us in position to be able to mitigate any, you know, potential headwinds that we see here. You know, obviously with some of the recent news coming out of the current administration, you know, we have started
Speaker Change: kind of implementing efforts and we actually started that last year and as we knew that some of this would would come into play here and we think if you think about China, Mexico, Canada from a tariff perspective we think about that as probably a single-digit million impact for us or headwind that we're going to look to to obviously work through here between now and the end of the year but
Speaker Change: You know, we'll continue to kind of work with our customers in terms of just communications around any kind of pricing impacts.
Speaker Change: You know, at this point, that's why, by the way, margin enhanced becomes a very critical component and has been. We can either take that to the bottom line, as we've done in certain respects over the last couple of years, gives us optionality to reinvest, but also is a mitigation factor for us, you know, when we see headwinds in the marketplace.
Thanks, Oliver. Thanks, Matt. Congratulations on the results.
Thank you, everyone.
Speaker Change: We have a question from Ryan Sigdahl with Craig Hallam. Your line is now open.
Thank you.
Hey, good afternoon, guys.
Speaker Change: I want to move down to Brazil. So launch at the start of this year. I know it's quite early there, but I guess anything you're seeing anything you'd like to specifically call out. And then specifically, curious if there's more interest kind of where you're seeing better traction with on the technology side, platform side or for CI gaming content side. Thanks.
Speaker Change: Yeah, hey Ryan. Yeah, excited to have Brazil come online. It was a grey market for many years, so pretty well established from a content perspective. Slightly different configuration of content that resonates with that local population than is traditional for our portfolio.
Speaker Change: So, nice to see some operating momentum there for suppliers. We need to do a lot of work to tailor our offerings to that market to make sure that our 1PP content...
Speaker Change: is going to resonate with that local player base, so we're doing that work now. It was always going to be interesting to see how the dynamics structure themselves as the market opened, and now we have a lot of data points that we can leverage to optimise our portfolio going forward. We're an aggregator in the space too, so we have a lot of insight into what's working, what's not working, and we can optimise as we go forward. This typically happens as new markets open, whether it's their land-based markets or digital markets.
all
Speaker Change: over the future. I would say on the technology side we launched marketing jackpots in the quarter so that was an exciting new technology that we've built for operators. So we've seen that go live across PEN. We're going to look to deploy that more broadly across the sector and this is really thinking about how do you overlay technology on top of content to really drive engagement with players and drive better outcomes from a 1pp and 3pp content perspective.
across a broader array of operators over time.
Thanks, Matt. Good luck.
Thank you. Thanks.
Thank you for watching!
Speaker Change: Our next question is from Rohan Sundram with MST Marquis. Your line is now open.
Thank you.
Speaker Change: Thank you. Hi Matt and Oliver, just one from me. Matt, how would you describe the slots demand environment at present and would your gaining results suggest any potential softness in that Q4 as what your major competitor called out?
Thank you for watching!
Thank you.
Thank you.
Speaker Change: I think we have the benefit of going after our major operators have launched their earnings. I think broadly you can see...
Speaker Change: resiliency in the operator base so we've seen that with the with the major corporates
Speaker Change: You know, we're still holding on to GGR levels well above where they were pre-pandemic. So I think the sector dynamics still set up solidly. Obviously, we had a few headwinds in the fourth quarter that I'm sure you're fully aware of.
Speaker Change: although I would say we're proudest to highlight the fact that we were number one ship share provider in the fourth quarter according to IWAS so very encouraging kudos to the team that's exceptional result and we also finished the year in Australia as number one ship share provider so lots of strength there and things to be excited about
Speaker Change: So I would say more broadly, if just looking at the operator dynamics, we see resiliency in the customer base.
Thank you.
Thank you.
Thank you. Thank you.
and John DeCree.
Speaker Change: We have a question from Jeff Stantiel with Stiefel. Your line is now open.
Thank you for watching!
Jeff Stantiel: Hey, good afternoon, Matt. Oliver, thanks for taking our question. You both touched on some of the idiosyncratic tailwinds to arped out growth in side play, which grew again in a flat market during Q4. As you think about the puts and takes for growth here looking out to 25 and beyond, I'm curious just how you think about...
Jeff Stantiel: Sort of competitive intensity in the sector and that's pulled from the legacy providers as well as some of the newer Tangential verticals such as sweepstakes that are growing rapidly in absence of regulation and just as a corollary to that Our sweepstakes a vertical that you would consider entering, you know Given the similarities to call it core social in that freemium model just any color there would be great. Thanks
Yeah, great question.
Jeff Stantiel: From time to time, when you layer in incremental live-ops, you can attract headwinds. One we saw in Jackpot Party Social Casino for Honest, and you can see that through the third-party data, is we had an economy issue in the second half in Jackpot Party. We've resolved that now early in 2025, so I think you'll see that game, our biggest game, get back to growth.
Jeff Stantiel: throughout 2025. We're excited to see that but in full transparency we had a little monetization issue in the second half with with Jaffa Party Social Casino and we'll see that re-accelerating into 2025. I would say on sweeps...
Jeff Stantiel: We are pro-regulated and taxable gaming in all its formats. Charitable gaming is a great example of that, highly regulated, another vertical we can get into. We see sweeps at the moment as being unregulated and so against our vision and strategy. If they were to regulate at some point down the path and tax it, you know, in the same accordance as our other markets, then we'd be willing to explore that, but we don't see a pathway to that happening anytime soon. In fact, we see regulation actually going the other way
Jeff Stantiel: and many AGs in different states are putting cease and desist out against sweepstakes operators. So at the moment we're watching it closely. Obviously it's a fast-growing category but doesn't face the same regulations and taxes that our operator partners do across the U.S. market.
Thank you for watching!
Great. Thanks very much.
Thank you.
Thank you.
Speaker Change: Our next question is from Adrienne Lemme with Citigroup. Your line is now open.
Speaker Change: Hi Matt and Oliver. Look, I just had a question on the North American lease market. My understanding is it grew by about eight and a half thousand units last year or about five percent. Can you give us some thoughts on how you're thinking
Speaker Change: that it will grow this year considering the outlook for casino openings as well as how you think customers are thinking about the mix of leased versus owned. Thanks.
Speaker Change: Yeah, we're very encouraged by this and we think the dynamics come from operators being aware that...
Speaker Change: putting a limitation on the amount of the best games that you have on your floor.
Speaker Change: is a bit of a false economy. Your best players want to play your best game, so giving them access...
Speaker Change: seems to be the logical path to growing earnings and so I think that's what's really been driving the expansion.
in the Lace Footprint.
Speaker Change: I think it's more of a same-store basis for growth in 2024, not as much about new kind of expansions coming online, but actually operators adding more recurring revenue units. So we don't see that trend.
Speaker Change: normalising back to where it was. In fact, we see that probably being a continuation of 2024. We think that the dynamics are set up to favour continued expansion and really off the back of us releasing our best games in that category and our competitors doing the same.
Thank you. Bye.
Thanks. That's helpful, Matt.
Speaker Change: We have a question from Justin Barrett with CLSA. Your line is now open.
Justin Barrett: Thanks for your time guys. The question I just wanted to ask, you made a couple of opening comments Matt around your potential decision around where you're listed and potentially doing a more formal
Justin Barrett: dual listing or even a solo listing on the ASX. I just wanted to understand your considerations in making that decisions and roughly when you think you might have a final decision on that buy?
Justin Barrett: Yeah, great question and a strategic opportunity we've been considering internally. The genesis for this was investors asking us potentially about
Justin Barrett: looking for a dual primary listing on the ASX. I think maybe that stems from a lot of the US-listed peers have been taken private or are in the process of being taken private, whether that's IGT, Every or AGS, kind of leaves us without a US-listed peer. And so the inbound that we've had from both kind of sell-side and also investors and potential investors is there more that we can be doing to accelerate the adoption of our listing in Australia?
Matt Wilson: and Matthew Wilson. Thanks for tuning in. We'll see you next time.
listed on the ASX.
Speaker Change: And so, we just want to open up the opportunity to have a dialogue about that, you know, what that could look like for investors and potential investors. To be clear, no decisions have been made, but this is really exploratory. And in consultation with investors, we've engaged capital markets advisors to look at this very closely. And I think you can just consider this another way of us looking to optimize shareholder value. You know, we won't stop. It's a key focus of the board and the management team is to continue to look for creative ways.
to optimize shareholder value.
Speaker Change: And then from a timing perspective, you know, I think it would be, sorry, in the next few months we'll engage with investors and consider that feedback and make a formal decision but no decisions made at this time.
Thank you.
Thank you.
Speaker Change: We have no further questions in the queue, so I'll pass it back to Matt for any closing remarks.
Matt Ryan: Before we wrap up today's call, I'd like to share some closing thoughts. First, I wish to extend my gratitude to our key shareholders and stakeholders who continue to support Light & Wonder. We have a dedicated team and are always seeking new talent to add to our workplace. Operators can expect top-quality gaming machines and technology, while players enjoy exceptional digital experiences. And investors should anticipate continued efforts to sustainably increase shareholder value. Finally, I'm happy to share that we'll be hosting an Investor Day in New York on May 20th, during which we'll share...
Matt Ryan: some more Light and Wonders growth initiatives and future plans and we hope to see many of you there. Thank you for participating in today's call and I hope you have a great day.
Thank you. Bye.
Thank you.
Speaker Change: That concludes today's call. Thank you all for your participation. You may now disconnect your line.