Q2 2025 Light & Wonder Inc Earnings Call

Welcome to the light and wonder 2025 second quarter earnings conference call.

At this time, all participants are in a listen-only mode.

A brief question and answer session will follow the formal presentation.

During that presentation, you can register to ask a question by pressing star, followed by the number 1 on your telephone keypad.

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I will now turn the call over to Nick. Zangari senior vice president of investor relations and treasury to begin.

Thank you, operator, and welcome everyone to our second quarter 2025 earnings conference call.

With me today, are Matt Wilson, our president and CEO, and all of our Chow. Our CFO during today's call, we will discuss our second quarter results in operating performance followed by a question and answer session.

Today's call will contain forward-looking statements. That may involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call.

For information regarding these risks and uncertainties, please refer to our earnings materials relating to this call posted on our website and our filings with the SEC.

Who also discussed certain non-gaap Financial measures.

A description of each non-gaap measure, and a Reconciliation of each non-gaap measure, to the most directly comparable. Gaap measure can be found in our earnings release in earnings presentation, located in the investor section of our website.

With that, I will now turn the call over to Matt.

Hello, everyone, and thank you for joining us today.

Our Strong Guide performance and discipline Investments, across our businesses, and able to continue to earnings growth for the quarter.

Importantly, we delivered solid kpis across key segments, driven by gain content and thoughtful, execution, and a d environment which impacted the timing of gain sales. Underscoring. The resilience of our business model was continues to be driven by our R&D engine and expanding Studio Talent.

As announced we closed the grover. Chartable gaming acquisition on May 16th. We see continued positive momentum in the industry, particularly in US states, which are expanding electronic, pool table programs,

We're excited by the opportunity and are already seeing positive early contributions. In fact, we added over 600 active units since we announced the acquisition in February, this highlights, the benefits of our Diversified business model, and execution discipline. And we look forward to key light and wonder game launches into the charitable gaming Market in early 2026 with differentiated titles that will be incremental to the current Fleet.

We're pleased with the progress of integration as onboarding and operational alignment have been seamless to date. Our new office and studio in Raleigh. North Carolina will serve as the main hub for our future growth and operation.

We have also been working diligently on our expansion plans into Indiana implementing the infrastructure in place to be ready from day. 1 and would currently expect to deploy our first units in the state this fall.

Additionally today, marks an important day for light and wonder as we are excited to announce the company's decision to transition to a sole ASX listing by the end of November 2025.

Vision was cleared that this path will deliver tremendous shareholder value over the long term.

We continue to engage with index providers and other stakeholders across both markets with the objective of ensuring that the transition is conducted as smoothly as possible and will provide further details in the coming months.

Further as outlined at our recent investor Day. In May we have exciting growth plans which should provide an attractive investment proposition for both existing as well as potential new shareholders.

Turning to our operational highlights in the quarter.

in gaming, our gaming operations, exclusive of Grover's contribution continues to deliver strong results driven by the performance of our Evergreen franchises and the success of our new content releases

Sequentially. We added 845 units to the North American install base and over 2,700 units compared to the prior year.

We have achieved 20 consecutive quarters in North American Premium install. Base growth with premium units holding at 52% of the North American police. For the quarter, a true Testament, to the quality of our games, underpinned by our unique R&D platform.

Our proprietary titles, including Ultimate fire link and huff and puff games continue to both Excel and existing and new list game categories on the iOS chart.

in fact, Latin wanted 4 out of the top 5 indexing, new premium and wide area Progressive games and led the market with over 44% of the total top, new games in the category with huff and even more Puffs Grand ranking, number 1,

We are confident in our ability to further, invest, and nurture, our homegrown franchises, which generate higher returns relative to life of titles with clear line of sight to create a new engaging scenes and games.

Game sales has been and will continue to be a key driver of our success. We've gained meaningful, share and cemented our standing over the past 3 years. In core North American and international markets as well as more recently across North American adjacencies.

Global sales for the quarter. Saw a decline, particularly across the International segments, primarily as a result of a new cabinet release in Australia, coupled with the timing of sales into Asia being rated to the fourth quarter compared to the prior year.

For North America, unit sales were down moderately year-over-year. We experienced some operator apprehension regarding Swap purchases early in the quarter and saw a pushout of timing for some of our units sold into Canada.

From a macroeconomic standpoint, as you were all aware evolving, tariff policies have contributed to a dynamic environment and land-based operators are navigating. A more complex Capital decision cycle than normal circumstances. As we have seen Improvement in the broader Market, the tone from operators has also trended positively we view these impacts with temporary in nature and not indicative of the long-term trend.

Overall feedback from our operator partners affirms that light and wonders games continue to deliver strong performance and value amongst the competitive Supply landscape.

We remain confident in our ability to execute with discipline and a well positioned to deliver a stronger growth trajectory as we progress through the second half of the year.

Moving on to systems and tables, we continue to execute our strategy. To grow the recurring revenue streams of these businesses year-over-year.

As the leading industry supplier of both businesses, we also have enviable sales revenue streams that vary quarter to quarter, dependent on the timing of operator hardware refreshes and new contracts.

During our investor day in May, we outline the strategies for each of the respective businesses and I'm confident in the direction that we are headed.

Recently, we've bolstered our table's product segment with new leadership and we expect the further build out our team soon to take advantage of the opportunities. We are seeing in this space of obsidian, our refreshed EtG offering, which is shown promise with solid early performance.

I'm also pleased to announce the expansion of our production capabilities in Mexico to further service our customers globally.

we expect this facility to run at full capacity to meet demands for our Cosmic, Cosmic upright and Costa dual screen cabinets, in Canada, and Mexico as part of our business optimization initiative,

Importantly, this enables us to fulfill the demand and timing shift of our Canadian units in the second half of the year.

Our team has done an exceptional job executing on the blueprint, we envision and this is just 1 example of how we are saying Nimble and adaptable to change.

Onto side play, where we continue to Trend above industry, average, with public market data, estimating our market share at approximately 12%. In fact, we continue to see record revenues as quickly flops and 88 Fortunes in the quarter with double digit growth compared to the prior year.

Importantly, Jackpot Party continues to stabilize as we saw sequential growth in July. Our Focus has now shifted to segmenting, monetization towards higher Roi players. We expect the further invest in New Way campaigns as a new game economy reaches an optimized equilibrium.

Titles, like dancing drums, which will leverage our side. Algo strategy, to acquire new players through add monetized, gains at lower costs, and cross promote them into our higher value game segments.

We have confidence in our franchises as they pay dividends for us across various channels.

Importantly, we're also seeing significant progress. In engaging, high-quality players with our direct to Consumer platform which grew materially reaching 18% of Revenue in the quarter.

As we shared an investor day, we see strong Runway to continue to grow that platform as a percentage of Revenue over the coming years driving margin uplift for the business.

Staying true to our core beliefs, we continue to evolve our gains with new live Ops, and game economy strategies to drive continued outperformance to the market.

What we've done. So we have seen a growing impact on the social container market performance and the expansion of unregulated and unpacked, sleep state casino games.

our internal analysis shows, direct Topline impact, from the growth of sweepstakes gaming in states that they are currently operating in

In states that have taken action to eliminate sweep. We have seen noteworthy uplift in our performance

As this issue is further addressed, we expect broader. Implementations of regulations will be a positive Catalyst for growth in the Social Casino industry.

So that's why I remain as an integral part of our cross-platform strategy, and our teams continue to work diligently on data analytics and game development.

I need to I gaming, our Omni channel strategy, continues to drive success with huff and more Puffs rates. As the number 1 game on Gross. Gaming revenue volume across our content, aggregation ogf Network in the quarter.

In fact, our game performance and third party Network expansion, enable us to deliver record revenue, and Aida supported by strong momentum in North American markets.

Gaming in the U.S. and Canada continues its strong growth trajectory, with over 25% growth in GGR year-over-year.

Gain performance, reflects our ability to capitalize on that Trend. So we saw 4 sequential quarters of ggr uplift on both first and third party content on our ogs platform.

Consistent with our strategy to prioritize High return opportunities. We have sharpened our focus on proprietary content and formed successful, exclusive Partnerships, both of which are Central to our plan to expand distribution and drive. Improved margin, economics across the business.

Our ability to scale content is second to none as we both the leading content, aggregation platform with 1 of the largest Studio operator networks within the industry.

This is evidence by our continued ggr records that at Elk and lightning box as our content continues to reach a wider audience allowing franchises like pyro and thundering to thrive with even more game extensions.

We have a robust regionalized roadmap plan for the second half of the year for further extend our current market momentum in our gaming.

We're also well-positioned to execute in Nathan, international markets, and new potential ones such as the Philippines to further extend our gaming presence globally.

Our gaming social and our gaming portfolio is strategically expanding its Market footprint globally.

We understand that content is at the center of our universe, and I want to reaffirm our focus on light and wonder, delivering great games. Deepening our player engagement across platforms and executing on a robust content roadmap.

We remain committed to investing in expanding our Studios and are excited for new Talent. Like Kelsey Foster and Nate McGregor and their team, the debut new games in the North American and Australian markets respectively.

While we continue to focus on executing our plan for 2025, we are investing with an eye to the Future. As we laid out at our investor day.

I'm incredibly proud of our teams around the world, so their commitment and dedication and shaping light 1 that into the company. It is today and will be in the future.

I'll now turn it to all of us for a look at the financial performance for the quarter.

Thanks, Matt. This quarter demonstrated our resilience through earnings growth driven by the team's discipline execution on our Core Business and operational efficiency.

We positioned the organization and its operation for long-term success as we continue to deliver on the milestones. We set for ourselves.

Revenue for the quarter was $809 million, inclusive of partial quarter contributions from Grover and record revenue in iGaming, offset by modest declines in gaming and C Play.

Net income increased 16% to $95 million, driven by lower costs of revenue and operating expenses, as well as lower restructuring and other costs.

Comparable prior year quarter included, a 32 million charge related to certain legal matters with the current quarter reflecting higher acquisition and related costs associated with the grover acquisition partially offset, by higher depreciation, and amortization.

On a diluted per share basis. This was 1.11 cents for the quarter and increase of 23% from the prior year period.

Was 352 million, an increase of 7% against the second quarter of 2024.

Our margin optimization programs continue to progress as planned with Consolidated aea margin reaching 44% for the quarter, a 400 basis point increase. Compared to the prior year period, supported by margin expansions across all businesses, Revenue growth from I gaming and contributions by Grover.

Adjusted EBITDA for the quarter was $135 million, or 4% year-over-year, primarily benefiting from the contributions from Grover and expanded margins.

Adjusted and Pad a per share, increased 11% to $158 compared to 1. 4 2.

Operating cash flow was 106 million in the quarter primarily impacted by 73. Million related to the previously announced legal settlement payment pertaining to our Legacy cables business.

Absent, this settlement free cash. Flows are considerable year-over-year increase to over a hundred million dollars driven primarily by earnings growth working capital and capital spend efficiency.

We remain committed to improving our quality of earnings through. Enhancing our recurring Revenue business. In addition to driving further efficiency, in our inventory, position, capex, and working capital Cycles to capture greater cash conversion over time.

Turning to our business unit, financial highlights.

Gaming revenue was $528 million in the quarter, with partial contributions of $21 million from Grover Charitable Gaming, which is now reported under the gaming operations line of business.

Aipa was 280 million in increase of 3%. With a margin of 53% in Improvement of 300 basis. Points against the prior year bullet, primarily driven by the addition of Grover and the growth of our North American install base.

We expect further investments into the charitable gaming business going forward as we expand our studio and Facilities along with our planned entry into Indiana.

Gaming operations Revenue was 209 million for the quarter.

Excluding Grover, we delivered a strong year-over-year revenue growth of 7%, driven by the aforementioned unit increases in North America.

Revenue per day, excluding Grover grew year-over-year, returning back to normalized growth as we previously discussed.

Looking forward. We expect our momentum to continue in North America on the strong performance of our games and proliferation of light and wonder content into the charitable gaming business.

Global game sales in the quarter were 191 million primarily due to macroeconomic uncertainty impacting. The timing of Game sales as well as year-over-year comps in the international business, on the timing of Hardware refresh cycle in Australia.

And 500 units of our entain order in the prior year.

I would also like to note that the entain shipments of approximately 3500 units in the prior year will affect International game sales comparability in the third quarter this year and we expect Asia sales to be weighted to the fourth quarter.

During the quarter, we shift over 9,000 units globally, indicating that our share growth in key markets, have established new baselines with solid demand of our products.

This pipeline will be supported by the exciting lineup that we will be showcasing next week at the australasian Gaming Expo along with additional game extensions from our Evergreen franchises.

Systems Revenue was 73 million in the quarter. Where the decline was driven by certain new placements and elevated Hardware replacement sales in the prior year.

Our systems software revenue continues to grow year-over-year, contributing to our recurring revenue increase in the business.

Cable products Revenue was 55 million in slightly higher compared to the prior year period on higher sales in Amia Nan, Zed offset by North America.

Turning to side play Revenue was 200 million in the quarter, as we continue to outpace the broader Social Casino industry.

Quick hits slots in 88 fortunes once again, delivered record. Quarterly revenues as they continue to ramp with exciting slack content and features.

AA was 74 million. A 6% increase in year-over-year and representing a margin of 37%. Largely driven by our direct consumer platform which generated 35 million or 18% of our total site play revenue for the quarter.

Ing as we strategically, broaden the deployment of the platform.

We expect as prudent process will continue margin, uplift in a sustainable way, over the long run.

Monetization continues to be our focus with growth across key metrics.

Average revenue, per daily active user, increased 4% to 1.8 cents. We are confident that we have the right initiatives in place to stabilize daily active users. As we recalibrate Jackpot Party, player engagement to return to growth.

During the quarter, we were able to achieve a pair conversion ratio of 9.8%.

Of the players that were converted to payers the average monthly Revenue per paying user was up. 10% approaching 129

Earlier, we spoke about external competitions such as sweepstakes gaming, impacting the growth of our social casino business.

We've identified some Topline erosion and increased marketing costs in the states. Where sweepstakes gaming is currently unregulated and the team has navigated the dynamic UA environment. Well,

going forward, we expect to benefit from a more favorable Market environment in states that ban sweep Stakes gaming

The growth in quick, hits slots, in 88 fortunes are flexed the strength of our game content and unrivaled player experiences that we can offer.

Over the years, the TMS successfully navigated previous challenges and monetization softness. And the idfa environment driven by external factors and we are confident that Jackpot Party and the broader portfolio will return to normalize sustainable growth. As we continue to build a platform the right way.

Stay in the course and investing in our team and capabilities.

Moving on to gaming, where we delivered record revenue of 81 million a 9 in increase over the prior year period on continued growth. Momentum in North America. And the expansion of our partner Network supported by strong game performance across first and third party content.

AEA increased 17% to $28 million in the quarter as we have successfully pivoted from low profitability offerings, where we focused on content, our core competence which drives higher margins. This resulted in a 300 basis point improvement in AEA DOM margin year over year to 35%.

This performance was accompanied by another record in wages process of 26.6 billion dollars on ogs.

A 22% increase year-over-year.

We saw particularly strong growth in third-party content, with incremental opportunities, and first-party content on our robust roadmap. As we close out this year with key launches in various markets.

We believe that there is still material runway for scanning this key part of our business for years to come, as we prepare for Market entry, as new jurisdictions, come online.

over the course of 2025, we have been able to identify efficiencies through, targeted business reviews, across the organization,

Our R&D investments remain intact as we continue to invest in game development and technology innovation.

Our margin enhancement, initiatives are delivering meaningful results, eliminating unnecessary costs and refocusing the organization on delivering on high performance which Matters. Most

Additionally, legal expenses were lower than anticipated in the quarter, and we expect an increase across the second half of the year.

Back in May I also highlight our cash enhancement program with incremental opportunities for upside potential to be realized.

I am pleased with our progress and free cash flow in the first half and we expect a further improve on a conversion basis, while scaling free cash flow for the long term.

Our net debt.

Leverage ratio remains within our 2 and a half and 3 and a half times targeted range at 3.4 times on a combined basis. Following the grover transaction which is primarily financed through our 800 million Term Loan, a and current pricing of silver plus 175 basis points,

Our Capital allocation strategy Remains the Same.

Grover was a great opportunity to fit into our core competency and R&D strategy with Greenfield opportunities.

It was a deal, which required a temporary move to the higher end of our leverage range, to create incremental value. For our shareholders,

in the meantime, we will look for opportunities to optimize our get structure through our strategic or financing opportunities when available

We purchased approximately $100 million worth of shares during this quarter, with a total of $266 million of capital returned in the first half of this year.

Since the commencement of our share of purchase programs in 2022, we have returned a total of 1.3 billion dollars to our shareholders.

As mentioned by Matt and referencing. Today's release, we have decided to move to a sole ASX listing.

We continue to work with our advisor on the exciting process and look forward to meeting with relevant stakeholders over the coming period.

As part of this initiative, we've also announced an expanded Capital Management program. Which includes an increase in the previously approved. 1 billion share of purchase program. To 1.5 billion dollars of which approximately 550 million has been completed to date.

With the added 500 million capacity.

We have approximately 950 million dollars now available under the share purchase program, which enables us to be opportunistic and aggressive as opportunities arise.

If we see dislocation in the market, we expect to use at least 50% of the remaining 950 million dollars to repurchase shares traded on the NASDAQ prior to the due listing.

If we were to fully exhaust this 950 million capacity by the end of 2025, this would temporarily increase our leverage to slightly above the top end of our target range of 2 and a half, and 3 and a half times.

We expect to return to our target range over the near term and remain committed to executing through a disciplined capital allocation approach and continued earnings growth to create sustainable long-term shareholder value.

With the closing of the grover transaction in the quarter. We are providing fiscal year. 2025 Consolidated, aea guidance range to be between 1.43 and 1.47 billion dollars with approximately 65 million of contribution from Grover and Associated adjusted. Empad a guidance range to be between 550 and 575 million.

As we work to execute through the end of the year, our Focus remains to stay committed to our strategy and long-term goals while continuing to invest into the core of the business.

We expect a third quarter, year-over-year Consolidated aea growth to be in the low double digits with momentum building into the fourth quarter, where we anticipate an acceleration and growth across the business and particularly in international game sales.

I would like to conclude today, by acknowledging the efforts of our team to continue to deliver world-class products, driving achievement of several of our key initiatives, including noteworthy progress, from some of the most important, kpis, we are focused on internally such as our premium install base, growth and cash flow generation.

There is no team, I'd rather work with than the 1. We have in place as we continue to work towards our Milestones, underpinned by a proven strategy and robust product road map, that is built to be sustainable over the long term.

With that, we'll turn the operator for questions.

Thank you. We will now begin the question and answer session and if you would like to ask a question during this time, please press star followed by the number 1 on your telephone keypad.

If for any reason you would like to remove that question. Please. Press star. Followed by the number 2.

And in the interest of time, we do ask that you please limit yourself to one question.

Again to ask a question please press star followed by the number 1 or pause here. Briefly whilst questions are registered

The first question comes from Rowan and Gallagher with Jordan, your line is open.

Good morning everybody. Um just in relation to the new information uh and your decision to pursue a sole ASX listing. Can you walk us through the investor engagement process, the timing decision conscious of obviously material, litigation a foot at the moment and the mechanisms in place uh to manage any volatile trading please.

Diligence and investor engagement across Australia and the US and we've received nothing with strong feedback from our major investors as evidenced by many of them transmuting stock for the ASX to support the initiative. We think transitioning to a soul ASX listing, will help consolidate liquidity into a deep and liquid Market that has a comprehensive and deep understanding of the gaming sector, and we expect it to unlock maximum shareholder value and align with our growth plans that we outlined back in May at our investor day. Um, from a time in transition perspective, we targeting the ASX only listing by the end of November 2025, uh, with completion expected. In advance of the December, S&P rebalance, we've been actively engaged with not just shareholders, but also index providers and other stakeholders to make sure this process goes as seamlessly uh, as possible. Um, as we transition to a sole listing on the ASX, our market cap will go from Circa 4.5 billion Australian dollars to 12.2 billion Australian dollars. And it will take us from circuit number 9

90 in the ASX, 100 into the ASX 50 and importantly, into the index. So we think that's an exciting Initiative for us, that will optimize shareholder value. And we'll finalize the timelines and dates over the coming weeks and months. So, yeah, exciting comes off the back of extensive consultation, uh, with shareholders and we feel like now is the right time to get on and execute against that importantly, from a Capital Management perspective. Uh, We've increased our share buyback program from the authorized 1 billion dollars by the board to 1.5 billion. So we've spent today

8, 550 million of that. Um, authorized share buyback which leaves us remaining 950 million, which represents about 12% of our current market cap. Um, and we as a management team board have really demonstrated over the years, uh, to, you know, really be great stewards of of shareholder capital and to, you know, affect that buyback. Um, when we see opportunities in the market and we anticipate to do the same today we expect to utilize at least 50% of that 950 available capacity uh, on buyback prior to the NASDAQ D listing. Um, and if we exhaust the full 950 before the end of 2025, it will take us briefly, uh, temporarily out of our Target. Leverage range of 2 and a half to 3 and a half times. But we've shown the business is highly cash generative and has the ability to get back into that range, very, very quickly. And so that's what we intend to do. So yeah, with all those inputs from shareholders and other stakeholders, we felt like now is the time to move forward and execute um, the board and myself have approved this

Um, sole listing and we're excited about it. We think it's a bright future for uh for the organization.

Thank you, Matt and just be removed from me just not to ask obviously the timing could could you obviously there's a process. Could you just give us any updates on the litigation of the month?

Yeah, not a huge amount of updates in terms of uh litigation, uh, both the Nevada and the Australian federal court cases are expected to head to trial in the first half of 2026. We had some very stable rulings in June this year, where the courts, uh, granted our motion to compel a risk to a specifically identify their trade secrets with more detail. Uh, so we won that motion also Aristocrat promotion that compelled us to, um, provide all of our hold and spin math models, um, to a risk to crap was denied. So, both of those things moving in our favor, we think that really kind of Narrows the circumference of the case to the 2 games that are in question. Uh dragon train and Jewel the dragon and uh you know really you know, wraps a bit of a bow around what? We know the universe of um potential um for this case is and then we just move forward and get this thing closed out, uh, and get in the rearview mirror. That's the, that's the update. We have to share with you.

Appreciate it. Thank you.

The next question comes from Barry Jones with truist. Please go ahead.

Hey guys, uh, just wanted to ask about the new guidance range. Can you maybe walk through the difference between the high and the low end? And any more color you can give on general visibility that goes into your expected cadence? Uh, and then I guess just additionally confirm that nothing's changed in your recently issued.

28 targets. Thank you.

In in the range that plus the 65, uh, from Grover. But we wanted to provide a bit of a broader range just to to give um investors some visibility to some of the potential externalities that are replaced. Some of the risks that we're managing through, you know, from tariffs and, and the broader macro and also some Investments with Landing to make in the second half, that really do put us on a path towards that 2028 guide, for, for us now, it's about closing out the year. But then also importantly, making the right Investments That set us on a course, to deliver the next commitment that we've made to the investment, um, Community, which is that, uh, 2 billion by 2028. Some of those Investments are things like

stand up costs to get into Indiana for for Grover. That's an exciting opportunity. That you know, we're going to front run some costs that will deliver fantastic results. Over the coming years as we assess our markets, scaling studios in Australia. And here in the US, we're also sending out the headquarters in North Carolina. So these are no regrets Investments that we want to make. Um, and so we thought we'd broaden the range just to give investors, you know, some context around the range of possibilities but make no. Uh mistake the 1.4 billion for the base business is what the teams chasing and we're driving hard towards delivering on that commitment. Yeah, just Hey. Hey Barry, how are you and just to build on that just, you know, based on the commentary that we provided um, earlier on our 3 q but they'll grow through it being low, double digits, we do acknowledge the fact that for Q a direct growth rate is sizable. Um and so ultimately we do have to match point line of sight to the top end of the range with a more favorable.

Cost setup uh from last year's fourth quarter but you know as Matt said but there's always some puts and takes related to kind of product sales and we just wanted to give as transparent of a view as we possibly could to to you all as investors. So, you know, we'll, we'll continue to kind of work through kind of our base business, and remains very healthy, just underpinned by our content. And, and, and just really just working through execution, um, as we move forward. So, we're confident in our trajectory we look forward to executing the long term. Yeah. And if we just zoom out for a second you know when we put that guide out back in 2022, the business was generating 913 and a bit. We just put out a range here of 1.43 to 1.47 businesses set up with great momentum. Uh, great operating capacity, incredible R&D engine. We're in a great position to get on and execute against the next uh, guided we've laid out so the team should be proud of what they're generated so far.

Thanks Matt. Thanks, Albert.

Thanks, thank you.

Your next question comes from, Matt Ryan with Baron, Joey, your line is open, Matt.

Thank you. Uh, just wanted to hone in on the additional 600 units that you uh, talked about with Grover and maybe if you could just share some color on, uh, if that's reflective of I guess natural growth in the business that you're seeing at the moment or, you know, anything 1 off. And and I guess just as part of that,

um,

you know, just any update on on how integrated you feel, um, you're getting within their business or or you're just sort of um, you know, taking things a bit slower, just sort of curious on how fast things are going with that acquisition.

Yeah, thanks Matt. I I'd say integration is off to a fantastic start. Um the business is performing really well delivering on a financial commitments. The thing that I've been you know, uniquely surprised is the cultural alignment. The team's fantastic Brian Brown's doing a great job leading that business. Jimmy Forest ahead of sales running that sales organization just 2, fantastic leaders that we have the benefit of working with on a day in, and day out, basis of the 600. Net ads is really nice growth in the existing markets, and it's just organic growth that we see with the Tailwinds that we see across the pool Tad segments in the markets that we operate in today and we see that continuing, um, into the coming quarters and years and then importantly, you know, the teams doing a lot of work to get ready for Indiana Market entry. So we think that happens in the fall. You'll see games installed later, this year, you know another great growth pathway for us wasn't in our base case wasn't really fully contemplated as we did the acquisition. It's just 1 of these nice things that we picked up, um, you know, through that, um, acquisition process. So yeah, I'd say I'm really happy with

With with the grover team, how they're operating their operating and delivering ahead of the expectations that we laid out. And then I think more exciting for me is The Games. First mineral games, my whole career is we have the first lnw content up operating on the grover platform already. So it's on a, an lnw cabinet. Uh, it's a known brand, we'll take a number of games to the g2e show and we'll show the real underlying power of the grover, acquisition that combination of incredible, lnw content and the fleet and network of games that Grover brings to us. So I'd say that's going better than expected and just really excited about the opportunities that Grover presents.

Thank you.

Thank you.

We have David fabric with McCoy. Please go ahead.

Oh, hi Matt. Hi Oliver. Hey, um, I'm just trying to understand the guidance for 2025 with the 1.43 to 1.47 billion. A guitar range. Did I hear correctly that includes 65 mil for Grover? Because wouldn't that assume that the underlying business is coming in below the 1.4 and then just to follow that up? I mean, in the, um, release, you kind of spoke to the fact that, um, with your customers, you've seen some cautious purchasing and delayed capex. Can you maybe talk about how that plays out for the rest of 2025 and why that may change to support hitting the guidance range? And and then just a little bit more color on those International sales through the second half, can you maybe share the the countries, you're selling the units into and, and the Quantum of sales. So we can get, I guess a better understanding of how to think about shaping in 2025.

Yep. Absolutely bit to unpack there but we'll do our best. Um, from a guidance. We have to, like I said we're targeting 1.4 and the base business. So the top end of that range, we're pushing hard towards that teams committed to delivering on it but we have a range of outcomes where yes should we see Investments that would set us on a trajectory to get to that 2028 number in the second half, we'll make them, we'll make them and that could mean that we missed that 1.4 billion by, you know, a very minimal margin when you

You think about the context of where we've come from back in 2022. So we're running the business, optimizing it for the long term. Um, still chasing that 1.4 billion number, we're not going to do anything silly in terms of taking cost out to, to manufacture a result. We we'll take um, the best decision on on balance. So yeah, that that's that's what I want to say about that. I'd say about, you know, operator apprehension in early Q2. I think that was a real thing. I think many investors spoke to operators back, then it was a tumultuous time in the markets. If you remember, you know, Liberation day escalating retaliatory, tariffs. Um, I would say things have largely turned positive in that light every operator that I speak to. And I've been speaking to, a lot of them over the last few weeks is the head of their budget, which is where they all want to be. That means they deliver their bonuses. So that's important to them ggr is solid. I think the operating environment is in a really good spot. So I think it's turned positive relative to where it was in early Q2 and if your custom your mind back to that period for all of us, it was a bit of a, you know,

A lot of unknowns in the marketplace. So I think net positive on Market. So I think that was reflected in the Isis survey uh, yesterday. Um, but in terms of the construct, Oliver of the forecast, go forward. In terms of the markets, you want to touch on that. Yeah, I I think we've got some opportunities globally and that's, I think that's the beauty of the international presence that we have. I think in the third quarter, you know, we'll see continued to kind of momentum here in North America. I think we've even in, in the Q2 parents still had a very strong. Um, overall

Total units sold and as we kind of move into the second half Canada VLT as we as we really scale up the Mexico facility. Uh here, we're already starting to ship those units out and I think that's going to be an opportunity for us here in the second half. We'll we'll see an uptick in Asia as we mentioned in Q4. That will be what I was saying, combination of replacement units as well as some new openings and expansions both in that region as well as here in the US as. And so I I think there's a couple of different avenues that we're going to to work through ultimately what we have in in our VMS is we have a Target list of opportunities that we manage so Siobhan and the team are hyper focused on every single opportunity um, in in the space between now and the end of the year. And that's what we're going to execute on between now and and, and December 31.

Got it. Thank you.

We have a question from Ryan. Take out.

with Craig call Alan

Hey, good afternoon guys, uh, want to move over to cite play Social Casino, you mentioned sweepstakes, but curious, you mentioned some of those states that or you're seeing more attractive Dynamics, as as the states crack down and, and press back and sweepstakes. Is it possible to shift UA spend and marketing? Spend, and really just resources specifically to those States um, that are regulated against sweeps with better.

Seemingly Roi and and Dynamics in them, and then, secondly, kind of in the quarter, I guess how much of the margin benefit was a shift in spend versus the benefit from D to C, kind of thinking as we look forward, uh, from a modeling on on what to think from a margin standpoint in that segment. Thanks.

Uh growing games in quick hits slots and 88 fortunes um been as you kind of zoom out and you look at the sector more broadly, I think at this point it's undeniable to say that sweeps are having an impact on the Social Casino segment. Um, it's definitely a substitute I mean in our mind it's unregulated untaxed, I gaming. Um, there's no no denying that and when we look at the data, specifically around the markets, where sweepstakes have been banned, you see a significant uptick in terms of Social Casino. So, for out from our Vantage Point, there's just no denying. It's had an impact. Um, you know, on the Social Casino markets where sweepstakes is, um, is active, but we like to focus on the things in our control at light and wonder, that's outside of our control. And we'll, you know, we'll watch, we'll watch on as industry pundits like the rest of us. Um but the things inside our controller really are getting Jackpot Party to where we need it to be. Um, we've Rewritten the economy there, we've got the 18 working on it. Josh is in the cockpit himself driving, a lot of the changes, you know, I believe that we'll get that that, uh, game back to where it's traditionally has been. I mean, the good news.

Is for for Jackpot Party is it's cycling over easier comps in the second half and so, you know, we see solid momentum from June into July, um, but, you know, we want to see that play through. And we've got the team working really hard to make sure that comes into effect. The other area that we can control is direct to Consumer and I'm proud to say, the team's done a fantastic job, this quarter, really ratcheting that up. They went from 13% BTC in. The first quarter to 18% in the second quarter, we've given out a guidance in the 28, um,

Guy that would get the 30% as a driver of the uh, social Center business. Clearly with the trajectory on, we'll get there sooner than, than 2020. Hopefully a lot sooner. But I think the teams really lean leaned into the things that it can control, um, and um, you know, I'm proud of what they're doing and I I see, you know, continued momentum in the back half of the year, but do you want to just touch on UA and how we throttle that back? Yeah, it's a great question. So, you know, obviously we we've been talking about this over the last several years, in terms of how we want to be able to scale monetization over time while still, you know, maintaining a relatively strong Dow uh base. You know what I would say is that Josh's team I'm not going to focus on, you would see some of this through some of the carnival Partnerships that we've had through jackpot parties. As an example, very focused UA opportunities, that are now, starting to drive, down back into the ecosystem, which is exactly what we want to do, to be able to sustain levels of growth over time. So Josh and the team know, getting the team are are looking for opportunities to deploy UA, effectively here. And and ultimately

Your next question comes from. Justin Barrett with clsa Nolan's open.

Hi guys. Thanks very much for the opportunity today. Um, I just had a question on on free cash flow. Um, uh, again a relatively not a week um quarter and you and you call out reasons for that but um I appreciate that. There's obviously targets to improve that free cash flow conversion over the long term. But is there anything, you know, I guess in the real near term that we'll see that conversion um materially improve.

Yeah, thank thanks for the question. So, yeah, when looking at free cash flow, I, I think it is important to kind of normalize that up for the impact of these 1-off. And so, we did kind of call out this Legacy litigation payment of of 73 million. If you, if you take that out normal as a free cash flow, actually saw a considerable year-over-year increase to, to over a hundred million dollars. So, you know, we continue to kind of benefit from increased earnings, you know, efficient working Capital Management as we work through the quarters and and obviously, we think this normalized view is a reflection of kind of how we see growth and free cash flow in what we're capable of doing that as as a business. So so overall I'd say is positive. And in fact, if you, if you look at at kind of a free cash flow to end on a, just a basis that represents a 77% conversion rate,

Okay on a normalized basis. So that's a 23 Point improvement over the prior year. Um and actually if you look at a trailing 12 months still kind of driving growth. So yeah to your question we are remaining focused on that. I think if you look at the base business and again the highly cashier nature of our our business. Now through Grover on top this will certainly provide um, healthy sustainable, cash flow generation and I would say if you look again, look at it from a normalized perspective, that's what we would expect as we move forward.

Great. Thank you.

Thank you.

Thank you.

Your next question comes from David Katz with Jeffreys.

Uh, afternoon, everyone, thanks for taking my question or good morning depending on where you are. Um, so 1 of the things, the themes that's been coming up among up or your operator, customers all earning season is the updated. Um, updated tax structure in the United States. Um, that appears to favor investment, uh, in, you know, things of a short useful life. Um, such as such as slot machine, the slot machines and Associated equipment. Um, are you having any of those conversations, is that coming up at all? And, you know, should we look at that as a Tailwind for you?

Yeah, that's a great question, David. How are how you doing? Um, so yeah, the 1, big, beautiful Bill, uh, certainly there's a lot to impact their, it's a pretty Dynamic set of legislation. But I think to your point there are really 3 main Provisions, that that will impact not only our business, but also, our our customers that we're working through. So so, I think, the 3 things are really around domestic R&D expensing. I think the second 1 is bonus depreciation, and then the third is just kind of interest, expense limitation, uh, changes. So, let me just quickly unpack the 3 and we are certainly having conversations with our customers around these things, but I think on the domestic R&D side, you know, that's certainly now allows us on certain R&D investment. Uh,

Investments to be expense immediately. So if you think about kind of yesterday that would have been advertised and capitalized over a 5 year period, we can now take that as an immediate um depreciation the

Both appreciation, uh, on the equipment now. This is where it actually helps us and our our customer base. So this gives us a bit of flexibility in terms of providing immediate tax deduction on our gaming Ops business and then to your point from a capex point of view on our on our operator side. Um, they get to take some of that uh, depreciation um, on the game sales and purchases that they make. So

Along with kind of tech cash, tax savings will will in our estimation support demand in the second half. And really not just this year but over the next several years. So so I think by and large, you know, we will continue to kind of obviously manage uh, and monitor kind of the changes here. But the 1 last thing I'd call out here is the bill actually does drive and potentially drive an annual cash tax savings for us of about 40 to 50 million dollars. So, this bill certainly benefits not only light and wonder, but, but our operator. So I, I would expect this to drive, uh, some momentum here in the second half.

Okay, noted. Thank you.

Thanks David.

Thank you.

We have a question from Rowan sandrom with MST. Marquee, please go ahead.

Thank you, just the the 1 from me, can you please walk us through the revised MPA guidance? So I understand it's now 5505 apologies if I missed it, but it was 565635 previous, I take on board, the commentary around the the increase Investments but just 1 but that's in the AE, the line and I just take on board your comments around the tax savings. So can you help us with what's changing at the below AE that our line to get to the new guidance? Yeah, thank you. Yeah. Great question. Thanks. So so I think a couple things there, you know, while Grover and I'll start with Grover is is a strong driver of a dark Road. You know, as we've indicated in previous calls, um, it is modestly recruited, uh, to and Pad a, when you start to factor in things like DNA and interest expense. So park Grover, first second, I think a couple other items that we would call out here is, you know, we took advantage of dislocations that we saw in the market with incremental share of purchases uh, here in the first half and and that drove, and we'll drive.

We had talked about um the AE but the new AE of the range that Matt mentioned earlier and that certainly then calls out the potential risk that we have just acknowledging the fact that fourth quarter AUP, growth rate is fairly sizable and though we have line of sight to it and then we're and Matt's point, we are executing to the top end of that range and we just want to be more transparent about that. So those are I would say over the long run of the business, we feel like these are just great examples of, of how we drive a creative EMP M over time. But that will work through that.

And then I think, in terms of the 1, big beautiful bill, I think the, the primary impacts that we'll see is actually not at the end pad. A line will be the cash, uh, cash tax savings that will have. So that will actually drive free cash flow more so than mpad at this point.

Thanks Oliver.

Thanks Ron.

We now have Andre from there with you. Yes. Yes. And Andre.

Thank you. Um, I just want to ask about margins and in particular, the margin optimization initiatives that that you've been talking about. Um I see you know year on year R&D is come down and corporate costs have come down. Just curious to understand you know how sustainable is that, or is it more a a seasonality question or how much more opportunity is there uh to make savings on those lines and then also

Related to margins. Um, is it reasonable to expect that there'd be pressure on Gross margins at the moment. As I see, you know you've reported average sales price um up 2% year on year but um you know would cost to be going faster than that at the moment.

Yeah thanks. Thanks for the question. So yeah, obviously margins and margin enhancement near and dear cash flow enhancement to Sister program. Now in place near and dear to my heart clearly, as a finance guy, you know, we grew margins uh to your point 4 to basis points. You read at 44% in the quarter so we continue and we'll continue to focus on optimization across the business. I think Matt made a made, a critical point there that we're not, we're not cutting Investments and, and R&D to just kind of make near-term targets. So, we'll continue to kind of focus on these things, as, as, as an organization to drive sustained levels over the next, um, several years. Um, I think for the balance of the year, I I would, I would expect margins to remain relatively stable here, uh, through 2025, I think, if you think about the game, uh, the grover gaming contributions, gaming Ops continuing to scale, that's going to drive higher margins, you know, for us, you know, that mentioned DTC, uplift, 18% for the, for the quarter.

We see that, uh, scaling prudently here, uh, over the coming quarters and years, you know, kind of the shift of 1 PP. And, and really the focus that Nathan. And, and the teams have have have driven in the eye gaming space will help us again Drive higher margins. So I think we've got ample room to continue to invest. Nate McGregor. And Matt mentioned again Nate Nate McGregor. Kelsey Foster, we're going to continue to kind of Drive the right levels of Investments to to to be able to sustain our growth vectors over the next several years. Yeah. And we have no intention of of scaling back R&D, if anything, we're just really focused on making sure we maximize Roi and every dollar that we spend, you know, we have very clear investment thresholds and we, we make sure that the studios are are meeting those. I, I think you can see in the new premium release games in the Isis charts, we we have a seasonally High 44% of the new games in that report. So the R&D engines firing, on all cylinders is a testament to Nathan drain, all the work that he's doing and we want to scale that over time. Yeah. And and just 1 last point. I think you brought up corporate

Work earlier, you know, obviously that's an area that we we also focus in on, but that's also due to some timing of legal expenses. It's a bit lighter here in the second quarter. Uh, that could continue to potentially EB and flow here between now and the end of the year. So we'll continue to monitor that.

All right. Thank you.

Thank you.

We have Thomas fort with Maxim group. Please go ahead.

Great. Thanks man. Oliver so 1 question as it pertains to Cy. Play any updates on changes in economics following the Apple epic games legal battle and consumers being able to pay side play outside of Apple's platform. Are you seeing any changes to Consumer purchase frequency when they pay you directly versus using Apple pay as an example?

Direct and intimate relationship, um, with your users. So, we mentioned at the investor Day in May our VIP portal that we're building, um, which is as much about having that, you know, player intimacy, as it is about, you know, transacting. Um, you know, we watch it very closely, we're trying to obviously capture more value when they come and, and purchase directly, but we, you know, we, we mimic some of those offers and we're not trying to, you know, exacerbate, uh, the frequency of purchases. We're trying to, you know, maximize long-term engagement. So, you know, we see that ruling as favorable for margin enhancement. But but also for player engagement over the longer term.

Thank you, Matt.

Thank you. Our final question comes from Adrien LM with Citi group.

Oh hi Matt and Oliver. Uh yeah just wanted to focus on the premium lease space in the US. Uh you know, you you obviously do have a number of games firing at the moment. Can I focus on huff and puff? Because I think that was the main replacement for

Dragon train. Um, the iso survey looks to show it fading in terms of performance and units installed. So, I'm just wondering, is that what you're actually seeing in the business?

And if that is the case, what are the plans to reinvigorate that game please?

I'm glad you asked that question. 845 incremental ads. It was an exceptional result and had, the is survey, didn't reflect that yesterday as a little bit of panic in the market. But we are very confident in the momentum of our gaming Ops business. Proud of that number. It's, you know, 1 of the kind of top 5 quarters. We've had in terms of net ads and it really just comes back to game performance and, and game design. And we've got a broad range of of games that are performing really well. Yeah, a huff and puff. Puff hard hat. Did a really fantastic job for us. In terms of making sure, we maintain that track and try and flee, you know, it's like many other games atrophies over time, but it's 1 game amongst a huge arsenal of games. I'll point you to that 44%, uh, of new games, new performing games industry-leading. I'll point you to huff and puff Grand. Number 1, W game in the marketplace, uh, to Monopoly Express. You know, we've got a lineup of games coming to g2e that the industry has never seen really next Frontier stuff. Uh, a product called LightWave, some people would have seen it uh, at the um, investor day.

With a new Frankenstein Game on that and new Jackpot Party. Game on that, we are very excited about the, the direction of travel for gaming operations. And, you know, we'll pleased to be able to print the number today, and just quell any calm any nerves out there about gaming Ops? It's a, it's a Powerhouse, in our portfolio. We've just added 11,00 units for Grover. We're on a great trajectory, and yeah, half and half Hard Hat, 1 game amongst many. But, you know, we're we're

Off to the Races when it comes to install base growth there. Yeah, and just what out there, you know, obviously, it's a massive point about global portfolios and just steps and breadth that we have. It's it, it gets maybe perhaps lost in the shovel here, but I just want to reemphasize a point from an RPD perspective Revenue per day. If you normalize out and just put again, Grover aside for a second, where our RPD from a base recurring Revenue perspective, has grown and back to, what I would say is normalized growth rates that we talked about over the last couple of quarters so so greyville. Mum not only from an install base perspective but the quality to match point and that's what gives us a lot of comfort. And and really, we're excited about what's to come. Uh, especially at T28

Okay, great. Thank you very much.

You're welcome.

Thank you.

I can confirm that does conclude the Q&A session. I would like to hand it back to Matt for some closing comments.

In closing, I want to thank our teams around the world for their continued, strong execution and unwavering commitment to Performance, the industry back, drop remains healthy and we expect to leverage the strength to cross our business to capture growth opportunities. In the quarters ahead. We're particularly excited with our recent acquisition of Grover, which we believe will be a transformative Edition. Bringing new capabilities, deepening our customer relationships and expanding our Global reach, finally, our transition to a full listing on the ASX market and exciting new chapter for the company, as we continue to, execute to our initiatives, to create shareholder value.

Over time, we're also looking forward to showcasing our innovation and connecting with customers and partners at AG next week and G2E in October. We hope to see you there. Thank you again for your continued support, and I look forward to speaking with you soon.

Thank you. That does conclude today's call. Thank you for participating. You may now disconnect.