Light & Wonder (LNW) 4 Nov 202020 Q3 Earnings call transcript

Good afternoon ladies and gentlemen and welcome to Scientific Games 2020 Third Quarter Investor Conference Call. [Operator instructions] Please note this event is being recorded.

Now let me turn the conference over to Robert Shore, Senior Director, Investor Relations and Corporate Finance for Scientific Games. Mr. Shore, you may begin.

operator. you, Thank

we and call, With our quarter Quartieri. third today During performance, will followed results Michael and operating Barry period. by XXXX are today's Cottle discuss a me question-and-answer

contain call Litigation the materially risks from to Securities of and statements Our that Act will that forward-looking cause the Reform involve statements statements These during differ could those call. include XXXX. uncertainties discussed Private under certain results today actual

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

measure will also be earnings our release non-GAAP discuss each of website. found financial as a each press in the well measure our and GAAP reconciliation on We measure most measures. Investors can A description the section of in certain non-GAAP to as non-GAAP comparable directly

archived this Relations of replay accompanying reference As materials being recorded. Also, Investor scientificgames.com. available a A slides be the conference is supplemental are reminder, on webcast and call website at in our of website. Investors this will our section

company's following management and as be speaking directly the are meant be to to While the document to call. facilitate will a review of slides, reference these used your the not slides results

to Now over me let turn the Barry. Barry? call

Thanks, thanks everyone, for and Bobby. afternoon, Good joining us.

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Truist [Operator Intrusions] comes from first ahead. go of Securities. question Please Barry The Jonas

first how on bit are like asset Hey anything different can My guys. question there multiple Good talk little flow on the options cash raises a is, the else? deleverage? to afternoon. top It table that's you you're seems or generation, of weighing Thanks. timeframes paths free sales, whether about equity and

Thanks, that. Barry. take This Barry I'll and is

So, of meeting, XXth most in at September noted actually is probably last Release I we obviously can't believe shareholder value, and this but interest will you evaluate board to think renewed it's early our Investor that confirmed its and speculate in we week really Press first initiatives drive our time. there

de-levering various bottom continue As from achieving something we're will and cost structural management. you by it's top guys know, to working and also consider demonstrated to greater Meanwhile, deliver. this management avenues and operationally cash growth, have committed and with line we and as cash quarter, flows to capital

one how then Great. you Great. the Barry there? from me; more And about differentiates for other lot about hearing product just what your out opportunity talk a can Maybe and gaming. offerings market you cashless we've been see

Absolutely.

we've think good So I obviously IP increase or has an all while have developed we've that the excited first an around it's interest it. about to for working everyone momentum, and on actually market area some this conditions We're a happened. due really of because been in seeing like

one, think In we it. mean, we know, machines see have terms the X,XXX segment, we're extremely and the which, as I slot systems how position you about category positioned have well positioning we given in leadership of about in number XXX,XXX our and I the connected in tables.

helps call already us last a between it part wallet just the of – we're that slot. and the let's really mile, it So,

a for hardware We're currently. combination And as before, on in software. got so of solution, pre-production we've been I working mentioned while, now we've a

interest a seeing stuff an forward. corporate for well that beginning said year. two later we us, in moving increased we're deployments think, that from now like I this And both perspective, it's We expect as this from have regulatory operator seeing customers perspective, right it's expect large we – that as I we're

one think a of going the the revenue hardware but good stream is multiple cetera. thing we licensing, maintenance, that's combination a detail, upfront dive won't also, into I it's terms this it's is be, which In some along about software the to with et model, of revenue,

position marketplace, the I as again and and as really mix of we've So, we're product, position there it. a our good length well given think in current IP time the good developed in in nice that

That's one. in great. If one seeing could just waves last some of of certain I COVID We're States. second certainly sneak in instances

seeing softness One in of talked some your competitors in October some about slight of their participation revenues.

if in you're like seeing your wondering segments? Just anything that any of

I that mean, cautiously over progress say that now, the things in, from we remain and of we are as some I’d particularly But QX optimistic. we're probably there. Obviously made QX. Europe countries in up see others that are the right you over aware

say would progress, situation monitoring are that, starting the continue closely I – but now we these to as right So the see things market. just are hitting

just it's thing you same seeing well. how suppliers if of forward. but back to of of run, playbook to else foremost, you We I to the move QX if all again hate to coming it. direction, QX. we thing are Yes. first be needed and that to but needed it to to members to team obviously now We at that didn't watching we've liked goes do. and QX momentum. see watching forefront kind out. everything run The turn thing's continue the customers will to this guess thing you're add we'd we'll had everybody We we to same be, Mike. there, got safety like cost a but now Reluctantly, that of the right we're play But structure QX saw or cautiously think only it momentum Barry, We We we things too the health to that this thing go and is out we see the where And we're to mean, are. optimistic our continue out. this obviously to like or QX, going want anybody's I'd as get the

Great. the appreciate Really Thanks guys. all color.

Next go question comes Beynon Chad Please Macquarie. from of ahead.

taking for Really confusing Good my is us afternoon. Thanks the on results. for only guess thing the I Nice game-ops. question.

So were bit. during a believe the base inactive I little you and that up units I quarter XX% of the your revisit double wanted were that to digits. installed active just said

So on more some a importantly that during the how Thanks. in led units the if quarter? actives, have turned could fourth on is obviously of on, little confused blended that. I'm when decline, that and just which it quarter you a beyond? these momentum And into help then you confirm more was year-over-year And to these XX% seen could

our give Barry. total next is KPIs, This We Okay. base. report to in a you installed

into XX% So that's what total they're sort there. about yes, play reporting XX% on. kind KPI. kind but currently turned of of of that's a but the units to of levels? units process in Can it back year-over-year, a actually you couldn't is – KPI guess when our It's reporting upticks terms in blended number, of our of the number year-over-year But their are

progress that quarter? fourth seen with Okay. potentially the through any have the more these that of way so you kind quarter? And should about, changes Is of could that, in how how we of – you you are turned absent as second think set the

mid-September, relatively thing to been shed. market kind it's XX% to that big It's so a one-month. XX% I'd range of about XX% perspective quarter is in of really only kind XX% opened And been part, York was But most One of for a the the kind us. range. from that is for modeling New

held to business social well. on moving really very guess I that great. the Okay, up

roll to some how were paths has and that think just now the or if that, titles? to I right there talk core could integration the solitaire fears if Integration there's any gone plans on play. the Thanks. so thinking some come other about monetization games titles, come-to-play and then far on come is down. you Could the further and out of

absolutely. Yes,

plugging that them So to on I just the a with and playbook. the into analytics, think the and SciPlay And integration we playbook the – our follow have of it's showdown nice the that built schemes front monetization gone UA come-to-play really nicely same first there. bingo really actually all, worked has well. We've

super we mentioned, would a the out, that that think specializes solitaire there's one game you you this first in As were of expect next which we this I went we say that year. in of when this into game excited the acquisition, a that's half of, studio genre. first as in about was beta

this go team-off Cell on Cell initially focus called and Splinter we tend we'll of game. after game, so build but game the then grow a that Splinter as And way to card solitaire related or

of – a in as genre we'll to it build we that begin center that from. excellence of think So will

Appreciate Barry. Thanks, it.

The John Union Please next comes Decree of question Gaming. ahead. go from

Good afternoon. bit some to your your Barry, wanted Hi, prepared ask comments and the of base. on the focus in about installed I a remarks everyone. little

the do more that output does general a kind that studios or quality, more of there? performing them, game games and Are about You've some high expect caliber on what I reallocation resources you're focus R&D or can kind means like? games a of of we of help be of bit new making the going side And you see wanted on would if and see take? look would higher what hired how and changes R&D capital it think with us Is for the to guess, the it improving just business. but – gaming to to be some output R&D we of the segment to the forward. to little going going you've mentioned talent spend you Should understand of in that more a what

top to my It's think question. a strategy. a it's great would a as of would focusing opposed I strategy more say, quantity line – I

has need years the leading done we job just and towards coming really to going fact, were those I team and you where the at pools markets geographies. together really opposite, the too in. gaming door, we to a development year that the largest the in profit finding The profit the of to resources team ago, spread the pools, amazing coming refocus gaps two many look too genres an in thin after putting within plan if In think in, the fill that's

in then and those the formula both We've and program get very increasing it. after have unprofitable going not the we've talent accountable so We manners. for them internal and after the we that finding some in. target are on restructured strategy large attract is those toward on going offsetting the and it incentive currently with centers, R&D then centers simple. in efficiencies great profits and And we led centers, drive incent them talent. forward top really, model that after about then that creative the brought the designed is efforts studios other by those R&D And is an that profit to we've and really

roadmap showed that we're this. so product GXE, already got and see on the based the outcomes games And really excited this excited. I'm the started to we and virtual strategy, We've about of super coming that some of we've

add one one I'll John just thing – maybe just And add I'll real quick.

definitely going and the said, team, the Savan Barry weight those then right? fewer And you to and we're putting Matt, prosecuting to Connie be but games, that's behind energy the As its team to by it's in more other the place. and and full and better games going has R&D then our after as of talk money plan cost product taking it in self-fund lineup, out places going and

line And too. obviously top higher

Yes.

little be give perhaps of a you've extent dimes And months that? Or increase of about and on helpful. the flow. question, segue opportunity few of was and on bit of now you'd Got is second working could it. your of kind improvement. nickels areas prior kind kind I impact and the capital Mike, a to in calls, probably a us quantify Is here kind my a into help it area you've up the of those to if roll you cash maybe free terms of unpack had your expertise sleeves. there? wondering and talked good that cash larger something opportunity That's the through that to And then some bit than of willing examples little to initiatives flow on

going in cash quote through get fine is suggest processes, valuable of collect pay that benchmarks bigger to done it. get why technologies, hear probably of me short time lot of tools, so a them. and to or some really giving PSI, capital, automation, old just those sure all that operations apologize, those it's to that get squeeze, got planning bit need that's what say industries, to way, focused box focus rid is work, tuning for our brainer, stop it, probably processes, When but at procure a deliver processes meaningful and around its a other to and on a with DPO, growth put to the waste we're going we're of making will. juice we would working to we supply I'll and demand and we're but flow take it's numbers, DSO, we a the all the it this intelligence you'll we've good And the you in the When on vis-à-vis just it of the maniacally which bread that right. in industry sure, in guidance if things required have top-line and just our from the look inventory fashioned I'll no will than

Very in back queue. good. guys. I'll hop the Thanks

The next Please comes Capital Sigdahl go Ryan of Group. Craig-Hallum from ahead. question

guys Thanks my for taking Great. questions.

So nice digital really margin a this quarter. in expansion

like little stuff does then a a near-term? one-time segment? in the margin on, what rate EBITDA And longer run good going that noted term QX some the look is in business but You

is deliveries the back the I let commentary I'll to then do by in some we articulate helped were run What to one-time rate trying QX I'll QX. in there QX it. of on jump Barry was the clearly

rate QX So rate. of QX is I don't run indicative think the run

QX. of that still in good in to winning of did there, business, pop we're so business, And delivery, little about we things how that a we're That into repeat one-time business, the over a obviously we QX. said, pop, very in we itself but nice that just of lot the carry expect should positive have future really QX wouldn't that one-time growth of being that not some

some SEC that the on really bit in a recognized more revenue detail in license the quarter yeah. There's in digital. third That's We filings.

So some XXXX really comparability of kinds go issue between is kind and of XQ to in XXXX. XQ business filings, all for the

expectations term Then just that any in or longer on margins segment? targets

don't. we No,

but There's targets no improve, near-term business scale kind in it's operating there. to of a the going obviously levers as

on of you tax of a to a some operators settlement there the able UK, there? back refund. to given Have to got been a guys BX Moving in up any Anything pretty from large there? share then the that can billion machines you claw legal pounds participation based

Nothing we at, now, can probably we this time. quantify pretty share looking minimal our right we're can over taxing that is definitely really that at but it, so all

Good for Thanks guys. it That's luck. Great. me.

Thanks, Ryan.

Ryan. Thanks,

The from of question Jefferies. ahead. David next comes Katz go Please

and everyone my afternoon question. Hi, for thanks taking

don't include better take they they strategic sort intended run made you isolated And earlier. that Or companies and I they more they those are to a – of If obviously Are leverage? mind, should I'm can of to strategic am wondering if in initiatives some comments allowing where oriented reduce to grow nature? – at were going the outcome like? strategic the be to an and differently initiatives just

and of can at a this drive what maximization in only before that's mentioned sense Look, delever – And shareholder looking to at both The speculate give guidance is here specific strategic as the we order as that the across we're achieve at before, value time. to I value. initiatives is, make company really on mentioned shareholder looking And goal we're actions. company. we had we can't the

see. I And…

David, the the I company. It's above. objective be to We've all to to would have offset. pretty the obviously consistent only of overarching we as add it's And thing is then delever tried I the an think

the to win way of pack products new driving always best focused reviewing cost is operational just and going to and cash and in in We and value. we're the business place teams the excellence a on terms With are together, like focus company that. as strategy stay think crazy board, just get we're gaming go gain and meantime, coming those do delevering in to shareholder maximize marketplace we're growth, of long the the the our how and things top-line thing. In the primarily we in share on all just we leadership to going to big another need towards put

offerings go answer How characterize through that the you fine of would process characterizations. of can point? sort an can product because position not it How time the easy the company. slot Historically, one yours of understand Is take to retoolings companies tuning of seen And some that other where variety of or a in inherent is? business if some specifically or to retooling? at that would process? you it. development it Is just I the ask respect with or repositionings within follow-up more this a we've I in

actually some single a three years started initiatives Look, you I we we're about remember, think, – if ago, platform. to get to

joined ago that agnostic. the the platform of completely a we're reassessment year of We strategy. do us a and target the about So, a and markets. product to working geographies half Actually, and and began started Jamie Toni

has that. And I first not I showed actually, of is – scratch – is fingerprint a from we're starting it a now. what call products would would on so, complete would an right say, GXE a and we're say, rehaul is outcome at this a the – okay, we you whatever

out to in we've only of putting it's going coming better And the given I you're talent to the think only start it's roadmap timeline get the like. that I think product been So over bring to the outcome going as we that in to an place. see more and described, strategies time you continue –

improvement And expectations, as in is even are would even they expectation seeing accelerate, so place our that make greater can as going but to say, the I will. more impact as gets our they team you start immediately, that's

a of your able to a – I and team think customer feedback to on great mean, we The GXE got point, event. from and was and to every was and the virtual a the Barry do customers zoo the feedback Matt little they were initial it bit was fantastic. I the petting the Yes, that, awesome. and reaction thought marketplace

about you customers that I we're think pretty reacting into I retooling, mentioned, think excited the months seeing so And as XX what the we're far. it. are well to and

Yes.

very I Thanks appreciate it. much.

The next of Susquehanna. Stauff comes question Joe from go Please ahead.

to are can right, reconstituted had you don't you know But that guess about belabor was front? in because and that the kind strategic Board meeting. first just you months point strategic or the as say think you is any decisions guidance whatever a that to very us timing I you just this review to there Board much. think the two answer little I of six process, be Good could questions. Thanks. take, could restricted likely be how portfolio that it. Thank about Look, from you we made? or the this Is referenced Is want afternoon. sooner as give baseline I would relative just something how

time not it first coming had a the all to I now. thoughtfully members all would week. at we to an that talk changed meeting with you, last appropriate timelines obviously trying to right Board change, new working we're of something pace. great timely we'll And all market around with have about of course. if We're that when it's together, through the it put move, do We're might the mean, anything

you do maybe the of significance are synergies, or synergies marginal how there about derive more that's gaming Okay. having you them of that lottery roof? explicit you one That benefits And having the together. something, other businesses do is, from one think could some both hopefully then you maybe is, think under answer strategically, and that

of mean, strategic Yes, It and sports guess providing BXB betting in supporting gaming, the create order Strategically, content. I to on look, provider choice forms way describe of is, right and it lottery, transition platforms best-in-class the global training obviously would stake in deep key I broadest now, leveraging I in operationally social. growth being while portfolio partnerships how means mean and then I digital differentiation. our to that's, across focused we're leading and the

we're cut of of is today groups, our house to we've to that an across that brands got franchises able amazing across synergies end, key all our kind the that So leverage of businesses right. and

access nice. So whether which our that, all Monopoly Wonka, units to have Fortunes, is that's Willy XX business of

are an customers there gaming well. shared forms and digital supply is of of some where businesses the well. other There's, as across some lottery The lotteries units we'll various example, as as of Canadian

business how as obviously that think we've we But had early our been that's in as mentioned how about So before. we're you of it. stages should approaching

much. Thanks very Okay.

Joe. Thanks,

Cottle like This question-and-answer over would our remarks. conference to Barry any the session. I to for concludes back closing turn

talent today, everyone. our to such the on the you your as we've balance look for that I to to today's creating added as a expertise longtime our value We're about Board Thanks us with Great. listeners deliver strong lot all gaming. and we've a to well support. and team new best of speaking ahead our and portfolio partners call, and I updating you Thank for excited and forward know to on quarter opportunities the mobile lay had truly joining our next of assets. progress sheet our products and improve you in supporters. land-based

presentation. conference you concluded. for Thank has The attending this now to

now You may disconnect.