Light & Wonder, Inc. Price & Performance (LNW)

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 well as run rate financial information. This information is for informational purposes only 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 maybe in the future after giving effect to the acquisition. 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. With that, will now turn the call over to Matt. Nick, and hello, everyone. Happy to have you on the call today. 2024 was another year of significant progress here at LiveMundo 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 underpinned by our differentiated strategy and product roadmap. In fact, our team and product are stronger and better than ever as evidenced by our consistent execution and focus on operational excellence. 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. As we shared last week, we have reached a definitive agreement to acquire Grover Gaming's charitable gaming business an upfront purchase price of $850,000,000 equating to a multiple of 7.7 times Grover adjusted EBITDA for 2024 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 $200,000,000 earn out provision Charitable Gaming is a form of regulated gaming. Where a portion of the proceeds are given to charity. Providing a formidable competitive advantage. Benefiting verticals Grover is one of the leading suppliers in charitable gaming, an attractive financial profile strong customer relationships and an appealing growth outlook. We value the enviable economics of our installed base business continue to invest organically and inorganically to further expand the fleet. Grother has an attractive recurring revenue model with a loyal customer base is core to our strategy. This will be the newest adjacency where we intend to deploy our robust R and D engine and more broadly distribute our variety of hit franchises and games. Along with creating further expected synergy.

Graver has over 10,000 store based units deployed over 1,500 locations in five states. Presented a compelling opportunity to further enhance our cost 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 we are currently not represented in North America. 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, provided last quarter Gaming continues to deliver exceptional results. Demonstrating strong growth from our broad array of franchises and well rounded gaming portfolio. Throughout the year, we made significant progress in expanding our installed base footprint. During the quarter, we added more than eight fifty units in North America on a sequential basis. Marking the eighteenth consecutive quarter of premium installed base growth. Which continues to be north of 50% of the total North American installed base. Importantly, we demonstrated the ability to not only preserve the impact of Dragon Train Light, also put up strong numbers more broadly and in other segments outside of premium such as Class two among others, In fact, we indexed 11 of the top 25 new premium leased and WAC games in Iowa's most recent game performance report.

As mentioned in our prior earnings call, North American revenue per day would be impacted in the fourth quarter. However, we are seeing strong performance out of the gate from Hap and Eden Moorpark Hard Hat which was deployed on the Cascada dual screen cabinet and is now indexing well above the game and largely replaced on a same store basis. In many key markets. 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 normalized growth in 2025 underpinned by the robust roadmap we have in place. 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, Canadian Light Lottery Terminal. And continued momentum internationally. In North America, we held number one ship share in both the second and third quarters. Continuing the momentum in the fourth quarter with the year over year growth in North American replacement units, In fact, we continue to hold number one position in the fourth quarter according to Ila's newly released U. S. And Canada cabinet sales and lease report.

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 Wonder. As we continue to broaden our international presence with a wide range of upcoming opportunities. 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 optimize casino floors. In addition to our industry leading casino management systems and hardware, we've also bolstered our software capabilities through innovation and partnership. Led to over $300,000,000 in systems revenue for the year a 13% increase year over year. The ability to execute our gaming strategy continues to be a key driver of our success in share gain. In fact, the power of our franchises in global scale gives me confidence we can continue to grow the business sustainably in the near future given the many opportunities on the horizon. [indiscernible] it was another record breaking year on several fronts as the business surpassed $820,000,000 in revenue underpinned by healthy engagement and monetization. The investment we made in Skyplay is bearing fruit. And the teams are collaborating cohesively on game development and data analytics, leading to several successful game launches across the organization.

Our four largest games all delivered record revenues for the year, with Quick Hit and 88 Fortune's continuing that trend in the fourth quarter. Since Light and Wonders buyout of Skyplay in late twenty twenty three, our social casino business has outpaced the broader market. Extending its run of outperformance over the past two years. During this stress, we refined the cyclical engine enhanced the monetization blueprint diligently to align with our growth trajectory. Throughout the course of the year, we've also crafted a viable path to prudently grow our direct to consumer platforms to I'm happy to share that we grew DTC to over 13% of revenue in the quarter as we continue to rollout this offering in phases. Eventually to the games that don't currently offer the DTC platform. Monetization 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. ARPDAO is trending steadily over $1 as projected, requesting our shift towards engaging high quality payers. 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 we typically see better returns versus higher acquisition costs around the holidays.

Firefly continues to be a vital piece of our cross platform strategy we focus on the pollination of key learning, [indiscernible] 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. One of our biggest strengths lies with the real time feedback that we get from our various live ops and Medigane deployment. The test of viability of these features has been a major contributor to our outperformance over the past two years. On rare occasions, the end result of these trials do not meet our internal expectations as we experienced a jackpot party in the quarter. However, the valuable insight that we gained during the profit enables us to share these findings across our gains to optimize the portfolio. Overall, I'm pleased with the execution of the team expect to see healthy growth in 2025 and we execute on the different phases of our strategic initiatives. Turning to iGaming. Where Light and Wonders proven OGS content aggregator and the North American market continued to expand and grow to record GGR volumes in the quarter and 2024. 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 ability to scale meaningfully alongside our best in class first party content. In fact, we executed a plan with several key launches and released over 1,000 games on the OGS. Surpassing this milestone for the first time in 2024. Most recently, we launched our chart topping Huff and More Puff game, which Spandall across North America. Our best ever game release, expanding the omni channel releases of our proven franchises as the brand continues to gain momentum and exposure in both the land based and digital markets. We plan on the continued proliferation of our R and D engine across the digital domain on our content first strategy, accelerating releases of first party content in the future. Wine Box continues its run with strong water from the Thundering Theory of an egg link. With 35% year over year GGR growth in the quarter. We also launched Rainbow Rich's Dream Pot, a wide area progressive jackpot game into The UK market, we continue to focus on driving further success of market attuned game content development. Additionally, we expanded our adjacent offering of the first cross platform marketing jackpot product Super Kenya, was launched in Quebec with WonderDrop another new marketing jackpot offering which spans across twenty first party content games with Penn in Michigan.

Separately, following a thorough strategic review, we've made the decision to discontinue and divest our Light casino business. This reflects our commitment to allocating resources to the most impactful parts of the business, which we have good line of sight to meaningful returns on our investment. While we're still in the relatively early days of investing in the business, we strive to stay nimble as an organization and thus focusing on the risk reward profile of our other businesses which has better visibility to superior returns relative to Light Castina. You may have seen our recent announcement that we've appointed Simon John to lead the iGaming business. With extensive experience as a seasoned gaming executive, and most recently as the Managing Director of our International Gaming business, I offers us a fresh perspective on our iGaming operations and strategy. Simon's familiarity with the fragmented yet growing global gaming market provides us with insights to help devise regionalized plans for both mature and emerging markets. This includes Brazil where iGain was recently released. As I reflect upon twenty twenty four, the R and D investments that we've made were vital to the success and share gains of our business. Importantly, we continue to build our talent pool, adding more designers and expanding our [indiscernible] as we onboarded key hires in North America and Australia.

Our bench strength is a key differentiator as we're able to fill key executive roles from within the company.

To that extent, I'd also like to congratulate Nathan Dreyen on his promotion to Chief Product Officer Lot and Light. Knighton is a tremendous asset to the company and a great leader for our critical R and D function. He has a clear and robust content roadmap will ensure our continued success positioning us for growth in the near and long term. Additionally, Rich Schneider will move into the role of Senior Advisor to the business. Was instrumental in orchestrating the product roadmap and R and D structure at Light and Wonder during the transformational years. And I'm very excited for us to continue on this growth journey together. 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 offering. Our R and D engine will be further amplified driving sustainable growth through our businesses including charitable gaming, generating outsized returns on our investment. In summary, our execution and performance last year gives great confidence in achieving our target. Want to thank our team, the Board, our shareholders for their unwavering support as we kick off 2025.

We are fortunate to have a very supportive shareholder base that embraces our vision as a global games company. As we approach the second anniversary of our successful secondary listing on the ASX, with ongoing collaboration with our global shareholders, are continuing to explore ways to refine our U. S. And Australian capital structure. The company remains focused on enhancing the liquidity market capitalization of its ASX listing and has part of this, we'll be considering a dual primary or a sole listing on the ASX. Accordingly, we've engaged advisers to evaluate the potential strategies to achieve this objective and we'll be seeking feedback from key stakeholders to ensure an optimum outcome for Light and One to shareholders. With that, I'll turn it over to Oliver to go through the financials. Thanks, Matt. Glad to be here today with you all to share our fourth quarter and full year 2024 results. Performance we delivered reflects the sound financial and operational foundation we have built and the execution prowess we pride ourselves on as we experience a fourth straight year of double digit consolidated A EBITDA growth. The fourth quarter also represented the fifteenth consecutive period of year over year consolidated revenue growth as we continue to execute on our key initiatives. [indiscernible] Consolidated revenue for the year was $3,200,000,000 a 10% increase from the prior year period.

On strong performance across our business units. Fourth quarter consolidated revenue was EBITDA guidance we previewed on the last earnings call. [indiscernible] Full year operating income was $668,000,000 a 29% increase year over year primarily on higher revenue. Fourth quarter operating income grew 8% to 100 and translating into a diluted net income per share of $1.2 for the quarter, up from the $0.73 in the prior year period. Similarly, we saw strong growth in the full year period as diluted net income per in 2023 to $3.68 in 2024. Consolidated A EBITDA for 2024 was $1,240,000,000 an 11% increase from 2023. Of this, dollars $315,000,000 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. Adjusted MPAD A for 2024 totaled $480,000,000 representing a full year growth rate of 24%. The fourth quarter contributed $127,000,000 to this as we track positively towards our 2025 targeted adjusted MPAD A range. Operating cash flow for the full year was $632,000,000 with the quarter generating $2.00 $2,000,000 The fourth quarter results driven by an increase in earnings and favorable changes in working capital. As we close the chapter on another exceptional year for Light and Wonder, We are executing towards our consolidated A EBITDA target of $1,400,000,000 With focus and planning centered around future financial and operational success, as we continue to be a compounder of growth years to come, Turning to the business units.

In gaming, revenue in the quarter was $515,000,000 an increase of 4% year over year primarily led by systems growth of 24%. Cable products and gaming operations also grew 104% respectively. Highlighting the strength of our overall portfolio. EBITDA was up 5% to $257,000,000 on revenue growth and a EBITDA margin expansion with margins up 100 basis points year over year to 50% in the quarter. As we continue to focus on business optimization initiatives, while investing for future growth. Importantly, we delivered 12% year on year annual growth in both revenue and AEBITDA. And expect this momentum to continue in the New Year. We made significant strides in gaming operations given the quality of our product offering and ended the year with over 34,000 installed base units in North America. With approximately 2,800 units added throughout the year. 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. Global gaming machine sales were $195,000,000 in the quarter on continued North America momentum. With unit shipments up 25% year over year in the quarter. As we further capitalize on the coveted number one ship share position in North America that we've held over the prior two quarters.

For the year, we delivered $865,000,000 in revenue on over 43,600 unit an increase of 16% in unit shipped globally compared to the prior year. 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. Systems realized $88,000,000 which contributed to the full year revenue of $3.00 $2,000,000 These are 2413% increases compared to the hardware and software services, evidenced by a number of landmark contracts signed in the year. Separately, Tables delivered a 10% revenue gain in the quarter to $57,000,000 on timing of utility sales in North America and Asia Light. We continue to maintain our market leading position in the business with $211,000,000 in full year revenue as we progress on innovations with the enhanced product offerings in this segment. Our gaming performance truly illustrates the breadth and depth of our product an embodiment of the returns that we're seeing from continued investments in CapEx and R and D. As we expect to return to normalized above market growth levels in 2025, where we expect meaningful game sales throughout the year as compared to 2024 we had concentrated new and expansion sales in the first quarter in Asia.

Moving on to SidePlay, full year revenue grew 6% to $821,000,000 of which $2.00 $4,000,000 was realized in the fourth quarter. Underpinned by a diverse portfolio supported by our advanced SciPlay engine. A EBITDA increased 7% year over year to a record $74,000,000 with margin increasing by 200 basis points to 36% in the quarter. This was largely driven by strategic user acquisition spend the expansion of our direct to consumer platform. Our continued focus on our refined UA strategy and phased DTC deployment throughout the year enabled us to deliver $272,000,000 in A EBITDA the year. An increase of 12% compared to the prior period. The commitment to scaling the business in a measured manner has proven beneficial as reflected in our various monetization metrics. Average revenue per daily active user grew 6% year over year to a record $1.06 in the quarter. And average monthly revenue per paying user scaled 3% just over $117 Furthermore, payer conversion increased to 10.9% as we The quarter's trend mirrors the full year momentum of KPIs where we grew average revenue per daily active user by 11%. And average monthly revenue per paying user by 10%. Against 2023. ThyPlace outperformance can be largely attributed to the investments we've made in the business.

Whether it's a Light play engine, DTC, talent or UA spend. Our team continues to execute at a high level and to further enhance monetization flywheel. Sustainably over time. This along with our upcoming game rollouts are expected to provide ample runway for growth in profitability, and expect SciPlay to further contribute and deliver considerable value to the cross platform ecosystem that we have fostered here at Nightmar Light. Turning to iGaming, revenue grew 11% year over year to $78,000,000 in the quarter, and A EBITDA increased 9% to $25,000,000 compared to the prior year period on 32% A EBITDA margin. This was driven by continued momentum in North America and Europe, as well as strong content launches. Full year revenue was up 9 percent $299,000,000 and EBITDA was up 3% to $98,000,000 Revenue and A EBITDA growth were impacted by 26% respectively. Factoring the breakage fees that were recognized in the second through fourth quarters of twenty twenty three, which amounted to $6,000,000 in total flowing through to the bottom line. Our growing presence in iGaming is record quarter of OGS GGR volumes. With over $24,000,000,000 of wages processed through our platform. More broadly, we saw the best ever quarter of U. S. TGR growth of 30% against prior year.

Importantly, in the iGaming business, we are focusing on high return initiatives with a strong growth trajectory across the industry and on our OGS. Our planned divestiture of Light Casino was to supported by strategic reviews, that are conducted consistently across the enterprise to maximize our return on investments. [indiscernible] Given we were in the investment stage of this business, we expect to see modest uplift in A EBITDA due to the discontinuing of these operations. 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. As we focus the business on our content and aggregator offerings, Going forward, Our scale be critical to our success. With Nathan leading our global product portfolio, we can further develop cohesive strategies and content roadmap to serve existing markets new jurisdictions as they come online. For example, with the market opening in Brazil, we launched approximately 50 game titles are digital native offerings. 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 furthering graining the business in our cross platform strategy.

Which is supported by strong market tailwinds and the expectation of wide range of compelling global growth opportunities for many years to come. Our priorities remain the same as we continue on this growth journey that you've seen over the past two plus years. Our strategy to optimize growth competitiveness and profitability to maximize the performance of our company remains intact. 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 Light shoring of resources, which has improved productivity across the organization. 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. This culture of accountability has resonated across the organization and is deeply rooted in our planning processes. Enabling us to stay nimble and retain flexibility to navigate dynamic environments driving positive outcomes. We will continue to reinvest back into the business, which has 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 Light through value enhancing initiatives. Our balance sheet is now one of the key assets Light and Wonder is equipped to take the business to the next level, With a net debt leverage ratio of three times at the end of the year, we are staying nimble within our targeted range of 2.5x and 3.5x to capitalize on opportunities for further value creation. Additionally, our liquidity profile was further enhanced with the recent extension, repricing and expansion of our revolver from $750,000,000 to $1,000,000,000 allowing further flexibility in capital allocation as we prepare for continued growth at Light and Wonder. As you will have seen in our release, we have settled and agreed to pay $72,500,000 to resolve the TCS Hoxley antitrust claims filed in 2019 related to our automatic card shuffler business. As we put this legacy litigation behind us and focus on delivering on our strategic priorities. Free cash flow was $74,000,000 in the quarter and $318,000,000 for the year. Reflective of our strong earnings, partially offset by changes in working capital and higher capital expenditures. 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 returns success based capital expenditures and leveraging working capital for compelling sizable orders.

Ultimately, we expect these uses of working capital and capital expenditures to drive growth and long term free cash flow generation into the future. Overall, as we continue to focus on business optimization, and operational excellence, we expect to generate incremental free cash flow to fuel our capital allocation priorities. We will continue to invest in our core capabilities to support leadership positions of across the business with commitment to driving high ROI which exceeds return thresholds. A great example where our conviction is high in the charitable gaming space. 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 MPET A basis in the first full calendar year of LNW ownership in 2026, we with synergies to be realized as we develop and integrate the business over time. We expect to move quickly we'll look to close the Grover acquisition during the second quarter of twenty twenty five subject to customary closing conditions. This transaction is expected to be funded primarily with debt with pro form a net leverage expected to stay within our target range. Separately, continue to be opportunistic as we see value dislocations in the market with regards to share repurchases.

We bought back a total of $462,000,000 of shares during 2024. With $243,000,000 occurring in the fourth quarter, as we saw a value creation opportunity We are committed to returning capital to shareholders for a $1,000,000,000 program [indiscernible] and in the context of a healthy balance sheet. [indiscernible] As we move into 2025, I anticipate a return to normalized growth underpinned by our execution on commercial strategy and robust product roadmap. Our team continues to deliver exciting engaging new games utilizing the latest technologies, Based on the timing dynamics of game sales and high return investment opportunities in side play's UA spend discussed earlier, We expect first quarter year over year consolidated A EBITDA growth to be in the low double digits noting that our continued investments will drive a enhanced organic growth as the year progresses. With that, we'll turn it over to the operator for your questions. Our first question will be from Barry Jonas with Truist. Your line is now open. Hey, guys. Thanks for taking my question.

As we enter the year where you've guided to hit $1,400,000,000 in EBITDA, Can you talk through how you see the cadence in getting there this year? Yes. Thank you, Barry. I think really solid 2024 campaign, proud of what the team has achieved. Throughout 2024, and we've got good momentum leading into 2025. So Light feel encouraged great product lineup coming across all three of our businesses and potentially our fourth business as Grover closes later in the year. And we see a clear lot of Light to get to the $1,400,000,000 guidance and confident we can deliver on what has been a long standing guidance for $1,400,000,000 in EBITDA or EBITDA by 2025. Did you want to just build on some of the building blocks? Yes. Just to expand on that to Matt. In gaming, we continue to see our North American installed base grow quarter over quarter. And given that RPDs are now normalizing back to year over year growth rates, we see plenty of runway from a gaming ops perspective to be to be growing for us here sustainably not only in this year, but into 2026 and beyond. From a game sales perspective, we do see, as Matt mentioned, strong momentum from a 2024 perspective.

Number one ship share in North America in both Q2 Q3 and Q4, as well as Australia number one share for the entire year. And we'll see cadence growth throughout 2025 as we expect meaningful 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, we expect to continue to leverage the SciPlay engine and we further scale not only our largest games, but also introducing and scaling organic new games in this space. And they show 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. 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.

In terms of iGaming, 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 the [indiscernible] execution, that's going to be supported by the market tailwinds that we see. So as evidenced by HuffnPuff, which was one of our best well, actually our best ever launch, we're going to continue to scale and build on that as we move forward. So across all of the BUs including margin enhancement opportunities, we see clear line of sight to the 1.4 and then Grover will be accretive to the 1.4 day one at both the EBITDA and the cash flow perspective. So yes, we feel pretty convicted on the 1.4. Perfect. Thank you so much, guys. Appreciate it. Thanks, Barry.

You are. Our next question is from Matt Ryan with Berenjoey.

Your line is now open.

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 some of your newer releases, Monopoly Express and Hard Hat Edition. Just trying to think about how we think that installed 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 Yes. Hi, Matt. Really proud of the game team's ability to maintain that ex Dragon Train Light. In the fourth quarter and add so many additional gaming ops units. I think it was really one of the outstanding highlights 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 Dragon 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 Dragon Train situation very effectively.

The way I like think about that situation now is we have 7,000 employees across the globe. 6,995 of them are thinking about the future, operating the business, building great games 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 Light leading into 2025 is completely stacked We're just scaling a new cabinet in KOSMIC upright at the moment going out in good volumes. With all of our brands we're really leaning into. So our new dancing drums game, a new Invader the Planet Mulai game, more Huff and Puff games, We've got a Wizard of Oz game coming back. So really strong Light of games that players want to play 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 gas offs as we move throughout the year. But Olive, anything you'd add or subtract? No. I think that's exactly right. And to your point from an RPD perspective, I expect that to scale nicely here through the year, which will obviously give us tailwinds well beyond 2025 and help us sustain growth well past that.

So yes, we're excited to also share some updates in May at our Investor event. Thanks, guys.

We have a question from Chad Beynon with Macquarie. Your line is now open. 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 if the growth came from mix or controllables that you made within the organization? 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 2025?

Yes. Thanks, Chad. Appreciate the 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 fee RPD impact that Matt mentioned earlier from a gaming ops perspective, we're able through margin enhancement initiatives through just a great work that our manufacturing teams have done over the last couple of years to put us in position to be able to scale margins through any type of headwinds that we face from a business perspective. So long term, Light expect gaming to continue down this path, just given the work and the initiatives that we put forth. And really across the board, we see from side play, 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. You kind of touched on kind of Light 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 Light casino perspective, it's really supported by just the increasing volume in 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.

But Mike Larelli and the team, they're still working through a plethora of years of runway here in terms of margin expansion, but I don't know, Matt, if there's anything else I might have missed.

No, it's probably worth just touching on the Live Casino decision more directly. So after our strategic review, 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 an example of 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 Light align of sight to better returns. You, both. Appreciate it.

Have a question from Andrei Fromeier with UBS. Your line is now open. Thank you. Just had a question or sort of a two part question around the the drivers of your iGaming growth and outlook. You talked about [indiscernible] being your most successful launch into iGaming. I just wonder how you think about The game pipeline into that channel and how you trade that off against impacts it might be having on the land base 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 U. S?

Yes, thanks for your question. Yes, so Huff and 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 Hearthstone. We've launched several beyond that. I think this really illustrated the sense that we can tighten up the cadence of releases across land based, and iGaming. This is kind of one of the catalysts for us to shift to a new operating model around R and D. So you see Nathan Drayton now leading all content for all channels going forward. So he's stood up a content leadership team. So the content creators across iGaming, SciPlay, land based and eventually Grover, but we'll 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 and D resources. So expect kind of a heightened cadence of releases across all of those channels. As we go forward. So we feel like we've set up a success year, we're going to launch a range of half and half games in iGaming Content is king or queen, as we Light to say around here in all these categories.

So the quality of our games will drive the success of iGaming over the long time horizon. I would say on the iGaming legalization path, we've learned over the years to control the controllables and legalization across states is a crystal ball type event and we've all got different variations of a crystal ball. So we don't see legalization happening in twenty five and any U. S. States. Lots of discussion in certain markets about potential for new legalization of states in 2026 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.

Light. Thank you.

We have a question from David Katz with Jefferies.

Evening, everyone.

Oliver, can you give us just a little bit of of color around we got the EBITDA Light, but there's a lot of sort of moving parts within the business and expect that acquisition. How are we thinking about growth in cash flow either on an operating basis or free cash flow how do you think about those rolling forward next year or two in the model?

Yes. Thanks, David. How are you? Good to hear from you. Listen, free cash flow continues to be a key focus for Light and Wonder in terms of long term value creation. Obviously, there's going to be some kind of seasonal factors that play into kind of the quarter to quarter movement.

That we've kind of talked about. But as of today, a couple of things that I just want to kind of reemphasize is really the investments that we're making in terms of CapEx, so the sex space CapEx, we spent, just to give you context, over $52,000,000 year over year in terms of incremental CapEx to fuel our gaming ops installed base. We're going to continue to lean in that as we see that as a long term free cash flow yield there for us over time. The other component is these long term financing deals. We will continue to look at opportunities [indiscernible] etcetera that we called out here over the last couple of quarters This not only gives us an opportunity to further build relationship with these quality customers that can then yield 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. Now throw on Grover and what we're really excited about is this is 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 2.5, 3.5 range, so we have some capital allocation perspective, but really start to drive incremental cash flow for us to then put that back into the business as we see fit or obviously do other capital allocation strategies that we have.

So really the optionality remains here for us even post this acquisition really puts us in a great position as we look towards the next couple of That's all I need. Thanks. Thanks, David.

Our next question is from Rohan Gallagher with Jarden. Your line is now open.

Thank you, Matt, Oliver, good afternoon. Hello, everyone. With respect to iGaming in FY 2024, you've obviously had payments that you had to make to third parties. In terms of exits. And then also you've been investing in the Light casino. If you were normalizing that to sort of set up a base for growth in FY 'twenty five. 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 Yes. 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 if you kind of normalize that out, we would have been double digits or close double digits on both top and bottom line from an iGaming perspective. And so I think as we move forward from there, it'd be a clean compare overall. In terms of just broader impacts to kind of addressable market, I don't see that being impactful really at the end of the day.

So I don't know if that's Yes. I mean, so exiting La Caseta obviously shuts down a portion of the addressable market for iGaming. Based on our assumptions leading in, it's a smaller percentage of the market than we had originally anticipated. And the pricing dynamics in that category have declined since the investment that we've made. So we're really focusing the business around one CP content, great aggregation, the tools that we can provide to operators to better monetize their game. So really focusing the business around kind of our wheelhouse and our core competencies is where we're focusing the iGaming business go forward.

I appreciate that. And if I'm just a bit cheeky to ask a follow-up question, Obviously, the supply chain on Anthony's Formani Light done a fantastic job. Here in Australia, the only certainty is uncertainty around tariffs and steel, etcetera. What are your early indications around supply chain potential challenges not just for the industry, but for your good self? Thank you.

Yes. Thanks, Rowan. Yes. So this very fluid and dynamic kind of situation here over the coming potentially days, weeks, months, etcetera. I think we've done 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 potential headwinds that we see here Obviously, with some of the recent news of coming out of the current administration, we have started implementing efforts and we actually started that last year and as we knew that some of this 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 obviously work through here we'll continue to kind of work with our customers in terms of communications around any kind of pricing impacts.

But at this point, that's why, by the way, margin enhancement becomes a very critical component and has been we can either 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 as a mitigation factor for us when we see headwinds in the marketplace. Thanks, Oliver. Thanks, Matt. Congratulations on the result. [indiscernible] We have a question from Ryan Sigdahl with Craig Hallum. Your line is now open.

Hey, good afternoon, guys. 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 if it's on the technology side, platform side or for CI gaming content side?

Yes. Hi, Ryan. Yes, excited to have Brazil come online. It was a gray 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. So nice to see some operating momentum there for suppliers We need to do a lot of work to tailor out offerings to that market to make sure that our 1PP content 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 we can leverage to optimize 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 optimize as we go forward.

This typically happens as new markets open, whether it's their land based markets or digital markets. You have one view of the world when they open and then you have to optimize go forward. So we'll make sure we do that. We want to be a big participator in that market going forward and hopefully more markets come online 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 Penn. 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. So making the appropriate investments in that technology, we're going to scale it across a broader array of operators over time.

Thank you.

Our next question is from Rohan Sundrom with MST Marquis. Your line is now open.

Matt and Aldo. Just one from me. Matt, how would you describe the slots demand environment at present? And would your gaming results suggest any potential softness in that Q4 is what your major competitor called out? I think we have the benefit of going after our major operators.

Have launched their earnings. And I think broadly, you can see resiliency in the operator base. So we've seen that with the major corporates. 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.

Although I would say we're proud just to to highlight the fact that we were number one ship share provider in the fourth quarter according to Eilers. So very encouraging, kudos to the team, that exceptional result We also finished the year in Australia as number one ship share provider. So lots of strength there and things to be excited about. So I would say more broadly, if just looking at the operator dynamics, we see resiliency in the customer base.

We have a question from Jeff Stantheil with Stifel. Your line is now open. Hey, good afternoon Matt Oliver. Thanks for taking our question.

You both touched on idiosyncratic tailwinds to ARPDAO growth in Psy Play, which grew again in a flat market during Q4.

You think about the puts and takes growth here looking out to '25 and beyond, I'm curious just how you think about sort of competitive intensity in the sector that's both from the legacy providers as well as some of the newer tangential verticals such sweepstakes that are growing rapidly in absence of regulation. And just as a corollary to that, are sweepstakes of verticals you would consider entering given the similarities call core social and that freemium model? Any color there would be great.

Yes, great question. I think we had a great 2024 campaign. All four of our games delivered record revenue. So thrilled with that and congratulations to the SciPlay Light. Most of that growth is driven by Light ops in our existing customer base. So really layering in reward mechanisms into these games to make them engaging and make them monetize better. From time to time, when you layer in incremental live ops, you can attract headwinds. One we saw in Jackpot Party Social Casino, if we're honest, and you can see that through the third party data, is we had economy issue in the second half in Jack by Party. We've resolved that now early in 2025. So I think you'll see that gain, our biggest gain, get back to growth throughout 2025. We're excited to see that. But in full transparency, we had a little monetization issue in the second half with Jack Party Social Casino, and we'll see that reaccelerating into 2025. I would say on Suites, 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 and tax it in the same accordances 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. And many AGs in different states are putting cease and desist out against Swedes Baker operators. So at the moment, we're watching it closely. Obviously, it's a fast growing category, but it doesn't face the same regulations and taxes that our operator partners do.

Across The U. S. Market.

Great. Thanks very much.

Our next question is from Adrian Lemmy with Citigroup.

Your line is now open. Hi, Matt and Oliver.

Look, I just had a question on the North American lease lease market. My understanding is it grew by about 8,500 units last year or about 5%. You give us some thoughts on how you're thinking 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 [indiscernible] Yes, we're very encouraged by this and we think the dynamic come from operators being aware that putting a limitation [indiscernible] a bit of a false economy. Your best players want to play your best games, so giving them access seems to be the logical path to growing earnings. And so I think that's what's really been driving the expansion in the lease footprint. 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 normalizing back to where it was. In fact, we see that probably being a continuation of 2024. We think the dynamics are set up for favorable continued expansion and really off the back of us releasing our best games in that category and our competitors doing the same.

Thanks. That's helpful, Matt.

We have a question from Justin Barrett. We CLSA.

Your line is now open.

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 dual listing or even a solo listing on the ASX Just wanted to understand your considerations in making that decisions and roughly when you think you might have a final decision on that buy?

Great question and a strategic opportunity we've been considering in internally. The genesis for this was investors asking us potentially about looking for a dual primary listing on the ASX. I think maybe that stems from a lot of the U. S. Listed peers have been taken private or in the process of being taken private, whether that's IGT, Every or AGS Light. Kind of leaves us without a U. S. 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 Australia? We're currently at 30% of our market cap listed on the ASX. And so we just want to open the opportunity to have a dialogue about that. What that could look like for investors and potential investors. To be clear, no decisions have been made, but this is really exploratory and consultation with investors. We've engaged capital markets advisers to look at this very close I think you can just consider this another way of us looking to optimize shareholder value. We won't stop it. The key focus of the Board and the management team is to continue to look for creative ways to optimize shareholder value.

And then from a Tommy perspective, I think it would be sorry, this is in the next few months we'll engage with investors in consider that feedback and make a formal decision, but no decisions made at this time.

Thank you.

We have no further questions in the queue. So I'll pass it back to Matt for any closing remarks.

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 and 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 20 during which we'll share some of our Light and Wonder's 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. That concludes today's call. Thank you all for your participation. You may now disconnect your line.