Light & Wonder (LNW) 9 Aug 212021 Q2 Earnings call transcript

Hello and welcome to Scientific Games 2021, Second Quarter Investor Conference Call. At this time, all participants are in a listen-only mode. A brief Question and Answer session will follow the formal presentation. [Operator instructions] Please note, today's event is being recorded.

Now I will turn the conference over to Jim Bombassei, Senior Vice President of Investor Relations for Scientific Games. Mr. begin. may you Bombassei,

And everyone. Operator. good you, morning, Thank

our During XXXX by results we will Barry a CFO. Eklund, Second Quarter discuss our Cottle, are and morning period. me today's and With Mike our call, question-and-answer this CEO, operating performance, followed

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

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

of we discuss We press the description financial to each measure each most certain directly to Scientific A comparable XX% reconciliation well the July be as on measures. earnings our website. on non-GAAP non-GAAP this our will found On that in XXth, GAAP measure non-GAAP not also proposal does Games in of proposal made as cannot can interest own. release, a at currently investor measure comment and a We further remaining the SciPlay section time. acquire and

to call our webcast Investor conference of Relations website. be on this your recorded. reminder, slides of at of being facilitate scientificgames.com. meant this review results. website our a As in the replay slides reference and available are A will materials the Section accompanying is archived Investor's Also, Company's are supplemental These

call me turn the Now to over Barry. let

you joining everyone thank and Thanks, morning for Jim. Good us.

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secure and growing year. pipeline With We the with going strong back path partnerships we great third-party land-based of integrate as more the opportunities of studios, new of a titles with the in roadmap customers, forward. feel live had the about half

betting around have to Turning unparalleled we advanced Sports able our the with to X that business, and uptime Tier sports tech the volumes world most are support position the with an Betting industry. platform unrivaled operators in and content,

grew Championships. million record we powered Our business continued to as revenue results, build our Soccer XXX% from European U.S. with on second-quarter the the by strong momentum at and we XXX bets QX over

define for differentiation. award-winning growth states, to XX rapidly We recently year full we opportunity the tremendous across SportCast where anticipated day. their adjacency launched two deploying see are continue fans and footprint, in SportCast, and XXXX. game. with With content, in a scale in Pennsylvania, U.S. in we in the deploying our included to New X We're a post-quarter continues sportsbooks sportsbooks create We BetBuilder own U.S. now for their with We're FanDuel other more momentum live states. U.S. and states. in states. story [Indiscernible] and leading with the SportCast the five second all power into quarter. acquired And end, the deployments already sportsbooks can This This and X with operators Virginia, leaning integrate an product. Jersey, sportsbook quickly same additional of with X And sports we on betting than U.S. moving U.S. also and FanDuel bets FanDuel all real

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these and with globally deals that over we're fast-growing in as to We look footprint Africa South territories. expand America XX in advancing we opportunities pursuing, our have

are over with of uniquely number turn positioned to to reinforce I I want that catalysts. a significant before we Mike, So

seeing momentum Mike will currently the has be beneficiaries. reinforced in bottom on to meaningful people Financial to that businesses. is the our lines. over year and years, speak coming clear top are our we results. see And now, And we continued We been games. growth the love past over And both thing that play will consistently One

And speaking today. Thanks, is It Barry. with everyone. to morning, good be great you

Barry's a started I and a just What to what this I'd year today, has difference echo Before year a quickly been. comments. like get makes

we have amount, financially, and accomplished an a As tremendous operationally, organization, strategically.

level to globe very businesses instilled new this are that Our discipline a the enabled Scientific you have and to is teams all that's encouraging our excellence around see. we deliver to It focus of of the results across commitment sharing with Games great today.

share we Lottery Sports some divestitures thoughts the intended get before Now our wanted of to results, the quarterly I businesses. Betting and into from

seen We of we're the continue great positions front enough of over they my have pace the interest in hold It I number And involved in what leading rarely I've of And the be these that are nicely. deals speaks they they lucky in market. career. to seeing move a opportunities forward course in a the rapid been progressing assets. they these The to and that to deals them. level are. these businesses have of at

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are the providing we thorough grow, the and and outside to deliver the being forward specific continue sheet with we're and our path the quickly, enable Balance the quickly unlock us right sharing on seeing are shareholders. inorganically. in updates us moving invest, the divestitures with soon, process. the thoughtful to we These are to to to organically While We powder dry will also while intended process to materially interest look confirm for we but both more value and you from

the let's results. are want for that, highlight I things with to to today. turn There four Now quarterly you

on continued AEBITDA results more year-over-year. QX, QX exceptionally revenue growing that to tripling strong into strong than we with drive and in our First, momentum XX% us saw enabling

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to delivering a we our flow Second, laser-focused real are XXX managing free quarter. value very balance be of the delivering testament how on focused cash Even to excluding million the was on free recovery, sheet, we rate, a healthy cash our a flow conversion in continue for this VAT shareholders.

delivering, tremendous months. just a net in over to of X Third, times our leverage we're making progress reduction reducing X X.X times,

base additional addition an makes quarter, since now mind, paid in as the on July. of we our target on in this and $XXX During million down Keeping exit the And and is million a we and of continue finally, in Savings Run to in for $XXX we another revolver year. permanent year. managing achieved fourth savings That $XX cost million be we last to our track the million are Rate $XXX our in million total October. XX diligent

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seeing we're digging Now gaining more. the a into and trends bit

open now install base, installed base, active. North X/X see American continue markets our base up globally XX% active, approaching We again, U.K our active our With to and July, active up in approximately now we're were nearly quarter with installed in XX% with and July. ed to in post-quarter active XX% XX% European the we of

very we strong And enabling units coin-in X,XXX year-over-year gaming cycles saw also approximately growth improve, saw operator We sequentially. of unit operations. at global capital

the KPIs Looking we the strength we're potential value the see eye growth underscores an ongoing of business keeping up cases continued renewed X% in grew in ahead, on on while XX% and growth performance continued through recent very tremendous back restrictions, was the up to The strong COVID expansion growth in by This July. quarter. momentum rise for and XX%, enabling turn for the our that, with of the XX% already world. The revenue revenue let's was the record of lottery. a strong post ventures lottery in first with another strong accelerating The joint around quarter quarter. momentum business. and With revenue lottery from the very strong the all-time to business increasing margin improvement fueled AEBITDA the business the our margin sequentially and A and what business top-line and EBITDA

have in over As from the outlook last year. COVID believe course Barry the seen in difficulty of how there improved, is lottery, we will the to benefit are tailwinds, long we're growth fundamentally specific dynamics into with predicting taking industry mentioned, seeing the we we continue long-term account

and producing SciPlay, X% ever. continue well the to revenue our and AEBITDA to sequentially, revenue social X% execute second-highest growing business, turning in extremely the Now, casino quarter

business, as meaningfully, our both inorganically. of Importantly, SciPlay opportunities part pipeline the integral and ahead an and grow in is to organically we with see invest of strategy scale we the and ability a

growth of year. to to with AEBITDA XX% record quarter XX% The delivering quarter compared business second outperform another of revenue growth as and continues turning to digital. last the of Now

impacted last XX% a the platforms revenues items year-over-year per normalize the we reminder, comparison If and iGaming standpoint. businesses sequentially. performance those that in sports underlying of year As this, numbers from had a one-time and certain X% we grew

our your numbers Our release reference. has for earnings normalized the and segment KPI page

and While marketplace, impact ease. sports benefit continue restrictions and our in will some betting businesses continue as there iGaming industry closures differentiated to from tailwinds increasingly the to the we to business and anticipate offerings our be

turn is is to let's to Now, net an continue and we tangible leverage, meaningful debt, area and This where make cash flows. and focus major that a progress.

our and XX.X the strengthening times, of second X.X on times. the leverage ending fourth last quarter the net X.X and continued of de-risking We sheet, of of path net net to at of which with billion leverage end debt of peak balance the quarter compares year the

expect the We steady of on our productivity. the in progress to continue to and make focus our increasing leveraging business organically, given strength

with $XXX was quarter to the X% billion ended second debt we last $X.X in the cost of year. average liquidity, of and million weighted Our of available compared quarter

a we have any due come that XXXX. until don't maturities As reminder,

just to Cash With strong and to impressive generated forward year-to-date. was Free near we emphasize, the great building term offset we to and quarter balances as long by on payable gains In year-over-year simplified organization very free our value more strategy. on cash cross-platform well vision in for driven to for is fully million the customers, our focus AEBITDA accounts differentiated. our unlock a results by exceptionally with are I Both franchises on and organizational continue continued underway moving we closing and singular this the structure. our shareholders. are Scientific growth The our for streamlined path driving testament deliver we lower partially shareholders, employees, will flow term this today, the and that performance, flow the year. how and value execute as as on million for new A Cash and Games a Now, intently focused Free in and of for in XXX journey flow, the strong a XXX

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At momentarily time, we Yes. [Operator assemble Jonas question roster. session. this with this and will At will Truist begin we the Thank you. Instruction] answer comes Barry the to pause today time our from question Securities. And first

you sports can limited morning. give have I what interest but going, you Guys, and seen? of betting lottery good say, color the sort any in can know you're you is additional on how sales for process

Barry. Thanks

in Before Mike that. on jumps

just where are. with first extremely start are by Let me we happy we saying,

executing continued game Company. well backend leading we're global strong Mike? become record of and to momentum well also, cross-platform and into growth are on in the our seeing divested delivering progressing strategy in vision extremely of a with X We our in quarters We're QX results interest And QX. assets. on

fantastic. very quality just results and a want at chat them very, this again record also doing. you amazing Yeah, Barry, results quarter pretty The with I quarter. to say, because it were today, good the by in of both Lottery teams Digital to that Barry They're what for to our way. is just process and the something said deliver quickly running pace are continuing

divestiture And the mind doing have so. our very value we're monetize some encouraged going assets. fortunate itself, discussions to the our We're in to multiple on unlock what of both believe by these in side viable On to able right we seeing, we're options we're shareholders we're having, be real externally, now. for to based

thoughtful to along over we've position about very businesses. rapid well from of we're process, might quarter, the at imagine, of in the and of those all be moving talked the course, about high lot things these which a powder you businesses, in longer-term so seeing has at inorganically. tension, and to confidence the Ultimately, ability quick a in which the much the bring we're process. We're we've balance both market nice As of as competitive thorough Given organically been course to leading We're very pace in about, got and our the interest outside a these quickly going them excited the as should make us we dry in we're resolution, strategic and create sheet, reinvest allow well. realize bunch Barry have that growth to quickly happen a talking and vision deliver of to

That's And there's seeing of a question. give what your resurgence color great. in and cases maybe on July a variant. just been that. for more business Thanks follow-up Can the in with just for then COVID you beyond? a this Delta little Clearly,

me jump want then? in You

Okay.

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haven't what what's tough and doing at July, going speculate to is a really through can to COVID on But business just I know say slowdown the It's time. is we happen. So exactly the well yet. seen

July the at expanding. average, and UK, units included all against actually you QX. In the CoinIn in with fact, gaming was KPIs for of the of and Europe, look And all higher they're active if than U.S., a lot

got say new we is where I I before. restrictions we good and are guess are that feel is, what we rapidly, the we news are games throws products we to at that in short-term demand gaming seen also bounces resilient So that pretty that the many so very and standpoint on pretty point now. about the that X our last we a numbers very demand play very, times would I and of environment, back year -- we we've businesses found good talked players to very, is short-term, right? related seeing business and them. reposition a at they're with some whatever great handle that that, the well-positioned were on the -- think about from took tough cost reinstated, to side, our we've measures that If what well love we And do see COVID even market

years, So to, significant expect so I that point a the and just of coming you positioned term, we're think going over uniquely top were longer catalyst, we bottom-line meaningful growth. to lot would with

much. so you Thank Perfect.

Thank you. Stifel. And Stantial the next question comes with from Jeff

strong sequentially business, Hi. I Good morning, and the wanted on up yields everyone. picking the ops questions Thanks quarter. specifically another taking for gaming start my here nicely international to on international during and you the to off Could you how broadly at you the product your cadence recovery talk U.S., on sales? quarter. look shelter gaming in progressing plan-based ops if see specifically second congrats

Yeah, absolutely.

We're are active improve, the seeing saw And coming back. we like, there's considerable in for day. units, CoinIn as U.S. the to demand products. per Mike continued pent-up I we people the seeing in saw what is think, here to have look, to play open we're our just international revenue as again, great up. said, U.S., just And And players markets news games. similar

built XX% June, for was Europe through You probably approaching about, market it which quarter have would by completely June. I shut down. there. UK we great QX, us, say But and remember was in you XX% share active back is active know, because as by landed at XX% the around up

set in the seeing quarter we It's as good are starting we're a internationally, QX, in -- and in was lessen. and great profit restrictions challenging of full to gains we see to while expect market, QX up So well. that to continued we QX saw the as to now see see recovery

Perfect, to the of year. And follow-up, on for the thanks. for touch color. remainder wanted That's margin the my then very helpful outlook I

issues. or other contemplating have seeing we we that year? peers of any should a your potential supply cost this trend commentary be half for your Is inflation some the chain back some Specifically, from around heard of the

I'll jump feel backend Yeah, on to the Barry and, that take Jeff, too. this in is Mike one, free

year. there. just the I think of of the was One for chain, then was margin there's outlook and two the supply questions back kind in one end the

in we're I chain is aware think that our A frankly. out Not we But would supply industries, all the quite we're say what industry. just in well-positioned. lot are think of the the obviously I On piece, there of marketplace. this, issues

to We demand. the meet are well-positioned

of chain missed any or issues. haven't note, revenue because so to And we margin, far supply really

went productivity, a coming excellence, hard. you chain As lot last kinds fantastic year. the business. were a well gaming recall, the got supply setup And this might we really supply I that's operations operational of and really about They're year, talking after a got late We've we doing those think running And a things. into within team new chain job. our

the we'll lottery them. margin demand, chain [Indiscernible] with all meet the results lottery to are be see talking is, and right of you back through revenue now. then that They're any that. so, half seeing off you And for strength on QX. side, the hit We think wood, have chain, We We I know on would record about even the versus in will and levels demand issues where comes year their these demand knock the that not meet seeing don't able know supply all good charts the the on were confidence feel that say all what in there. in historical guys, the we any supply the issues we of high

margin in cash the for million and just had we one in side One that time that of through the this have running remember guy margin in quarter. good quarter thing, P&L it we great $XX revenue margin, [Indiscernible] was did VAT was On a flow.

we've profile. of you operational margin margin year. the all well productivity, as -- focused XX We've took the that another underlying $XX the a focused We've know, performing on already been out. of on million concludes So view, are itself. those out repeat focused won't on But excellence, things been point last that really businesses million helping the cost we from been

There's I better selling, place rest QX year. business welcomed. is mix for full what But year. for be at of the look trends baseline a to like for depending etc. good the always look look products to mix quarter-to-quarter of unit the that got is of think the to the fluctuations we're on QX the a going some to I hope that

very I Mike. was it all color. on. Thank appreciate I'll That you, helpful. pass the

bet. You

you. Thank

comes Now from the DeCree next John CBRE. with question

remarks. Good morning, your wanted Barry, to I revisit everyone. prepared

how North help for much had how much focus exceeded think you're I was and XXXX. of from is a is How about that could put place installed I ramping? think seeing couple metrics a wondering the base if demand that reopening a you characterize It's initiatives you business yours we're you've on how Premium already. bit in strategic versus that the American seeing you while. of obviously been little talked and team a the on

approach, and driven inputs the a question. about, progress new game is new the tremendous large great you we're by at the -- includes as super really and and right? recover. year time outputs, great starting a inputs in effort And of seeing proud that we're great over there's that we're team we profit excited asked your commercial launched making just that And we've new focused it's that. I'm Thanks the in market done for perfect to which talked plan, games last roadmap just are marketplace, cabinets, in new actually because a the amount on really the of they've put pools a a to

scoreboard, a function the of riding recovery, is on in And so of seeing share. the of It's market your right? taking wave it a also the it seeing and it's outputs points your function So journey, it's of but both. the the but the early

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not. have I

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one question. Operator, more time have for we

much. you very Thank

from Thank Yes. that with you. Chad And Macquarie. comes Beynon

Thanks question. Hi. morning. my taking for Good

systems have in been leader a guys business for the You years.

partners? times, recurring to cashless help Thanks. business And being accepted generated us by unified looks that, your opportunity piece you back. going about business at to can think that over of some forward? revenues. and of But XXX it the a the related think like million systems your wallet are the is the features results, then of how annual come on quarterly that I starting Based really

that I'll one. in jump on Absolutely.

where about, real talked we pieces to very the it, of some So, as you of and assessment -- did leadership, modernizing other the put place and some came in similar that our thought We the in new of core thinking the both seeing of kind we're but gaming we're a on early And again also that from a the progress. leaning model business good but I perspective. side, business we're some still as the on from perspective, in said journey, productization in business.

going of to and where in in The early We world second and piece of modernization, really heavy cashless. you cashless. that, as on know, leaned leaned the we also part convergence the but new and pushing toward is

And tremendous so where momentum, there. COVID. that stand was of we really, a we're There's really amount obviously, pleased by initiated

us the really the on field I because remind As the business. technology, is anticipate properties that really that great in to we like today, to you that really best X will point about to required great XX,XXX connected in to approach X in the because are core And leading are there. to the deal leadership XX of systems build key in, player position live without the for we're another and got and prime IP interconnected are puts a the the did We've towards cashless place, we position we slots. partner footprint cashless a in in so Nevada IGT well-positioned get we're XXX,XXX, really months. deploy share with collection I solution, and of market about best we and additional that's really, one as next in well. with here of also the last machines in the the of approval But deployments team, mile We're XX% connecting trial wallet, and we're taking in we're get working because XXX,XXX

So thank you for the question.

the the of what the with that lot that That's talk in margins follow-up. to your then about the segment? that in-house Currently, about, with XX%. we in a bottom you and flows And me. particularly from talked years that Lightning guess margin start unrelated in-house opportunities of lot Perfect. right we once around studio? Box in given assume a in business bringing been you've the to I content margins sports you digital Should has segment to generate assume business all follow are your divested, that in through Thanks. increase, Barry, the line? the can should revenue

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build You market can it that build great so and game and holds. you a position

we the a high business. expect at margins on level, do so healthy And iGaming

flow. a to what only cash has that AEBITDA add very financial and today, And margin and business healthy exactly I Barry profile will what said, growth already

point it for get to like, why content going creates that strategy. after then differentiation, and it, And scale as real I As exclamation said we're some a the margin to going is we continue is that well. we're Barry obviously grow really there which that benefit

to I'll Great. Barry over comments. final some it for back turn

call. the Thanks, appreciate we're everyone. past Really very in We're excited the year. how and about making we progress much us for today's you joining accomplished

as transform and support. opportunities Company. a excited to moving leading to that, for demonstrates on hard businesses and pillars, and the and want We're work as all value, and you the momentum focus global with the Organization of in streamline thank become our unlock clear our of I optimize substantial invest and high-growth cross-platform quickly our deliver. focus path Portfolio our we your to game strategic Our our And teams. We're we execute a forward Company across strong with results about significantly talented singular our

turn you over Thank our call. Great, back on everyone the for joining us to I'll it Operator.

concludes attending presentation. today's for Thank so teleconference. That much today's Thank Yes. you. you

now may your lines. You disconnect