Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Light & Wonder Inc (LNW, Financial) achieved double-digit consolidated revenue and EBITDA growth, keeping them on track towards their 2025 targets.
- The company completed its first-ever share repurchase program and authorized a new three-year $1 billion buyback program.
- Strong performance in North American premium installed base, growing for 16 consecutive quarters.
- SciPlay segment delivered over $200 million in quarterly revenues for the third consecutive period, outpacing the social casino market.
- iGaming segment saw healthy growth with year-over-year increases of 25% in both the US and Canada.
Negative Points
- Higher restructuring and legal costs impacted the company's EPS.
- The company expects a modest impact on gaming margins in the third quarter related to the announced Entain deal.
- There is an anticipated limited growth in direct-to-consumer revenue in the back half of the year.
- The company faces ongoing legal expenses, which are expected to continue.
- The gaming segment's revenue growth was partially offset by elevated capital expenditures.
Q & A Highlights
Q: Multiple competitors are in the midst of M&A. How do you see that impacting the market and your positioning?
A: Our position is strong, as evidenced by our fantastic second quarter results. M&A activity is increasing due to stabilizing rates, making deals easier to price. While competitors face integration disruptions, we are focused on executing our clear strategy and goals. This could present near-term opportunities for us. β Matthew Wilson, CEO
Q: Can you discuss your current game and cabinet portfolio and what to expect in terms of new releases to maintain momentum towards your $1.4 billion adjusted EBITDA target?
A: We have made significant investments in R&D, resulting in a strong portfolio of hit games. Recent successes include Huff N' Even More Puff and Dragon Train. We have several anticipated games like Squid Game and Dragon Train launching soon. Our hardware, such as the Horizon cabinet, also supports sustainable growth. β Matthew Wilson, CEO and Oliver Chow, CFO
Q: There were higher restructuring and legal costs this quarter. Can you unpack that and what should we expect going forward?
A: We expect corporate costs to run at about $40 million per quarter as we scale. Some legal expenses from the first half will flow into the second half. We anticipate ongoing legal expenses, similar to other gaming companies. β Oliver Chow, CFO
Q: Can you update us on your philosophy regarding share repurchases and cash flow conversion from EBITDA?
A: We have a consistent capital allocation strategy, focusing on deleveraging while executing share repurchases. We have significant flexibility in capital deployment. Our businesses are highly cash-generative, and we manage free cash flow with a focus on annual performance. We expect continued investment in CapEx to support growth. β Oliver Chow, CFO
Q: How do you see the direct-to-consumer (DTC) strategy for SciPlay evolving, and do you view sweepstakes businesses as a threat?
A: DTC has grown significantly, now contributing 12% of SciPlay's revenue. We expect growth to normalize but continue to contribute positively. We monitor sweepstakes businesses closely but do not plan to participate due to regulatory complexities. β Matthew Wilson, CEO
Q: Can you remind us of your confidence in achieving the $1.4 billion AEBITDA target for next year?
A: We have made significant progress, with 22% EBITDA growth in 2023 and 17% in Q2 2024. We need an 11% run rate to reach our target, and we are confident in our pathway, supported by investments in R&D and strong operational momentum. β Matthew Wilson, CEO
Q: What are the next geographic opportunities for growth in the international market?
A: We see strong opportunities in traditional Asian markets like Singapore, Macau, and the Philippines. Future markets include the UAE, Thailand, and Japan. Our diversified portfolio across various markets positions us well for continued growth. β Matthew Wilson, CEO
Q: What is driving the structural expansion in the lease-to-mix on North American casino floors?
A: Post-COVID, casinos focused on their core gaming operations, highlighting the importance of having the best games. Operators are investing in premium leased games to attract top players. Our R&D investments in premium games are driving demand. β Matthew Wilson, CEO
Q: How do you plan to defend your number one market position in Australia?
A: We continue to invest in R&D and have a strong lineup of games like Dragon Train and Shenlong Unleashed. Our strategy includes leveraging successful games across multiple markets and platforms, ensuring sustained growth and market leadership. β Matthew Wilson, CEO
Q: What are you seeing in terms of the health of the US consumer and its impact on operator investments?
A: Despite a volatile news cycle, GGR levels remain strong, significantly above pre-COVID levels. We see no deterioration in our order book or gaming operations. The gaming industry has proven resilient, and we continue to invest for growth. β Matthew Wilson, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
