Aristocrat Leisure Limited (ALL) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to Aristocrat's Second Virtual Management Roadshow. My name is Rohan Gallagher. Along with Linda Assatoury, we look after the Investor Relations program here at Aristocrat. Today, we have several members of our executive management team. Mr. Trevor Croker, our CEO. Good morning, Trevor; We have Mr. Mitchell Bowen, who runs our Gaming and Transformation operations. Good morning, Mitch; and making her equity market debut, we have Natalie Toohey, our Chief Corporate Affairs Officer. So conscious of we're heading into our 31 March period end and we will be going into black out, we're keen to have open and fair access to our senior management team. So we've got over 100 registered guests. Thank you for submitting your questions. We'll go through as many questions as we can in the allocated 1 hour. So those questions that we can't answer and we cannot make it due to time constraints, I'll reach out separately at the end of this call to those participants. But with that and without further ado, I'll open the meeting and the roundtable. And I'll ask Trevor, first of all, if you could just give a quick update from your perspective around how the performance and the strategy of the company is going. Thanks, Trevor.

Yes. Thanks, Rohan. Good morning, everybody, and thanks for your time and continued interest in Aristocrat. When we went into COVID, we said that we were going to lead the industry out of this pandemic. And we said we're going to lead it out through being people first, customer-centric and focus on business resilience and operations. I can sit here today and say that we're achieving on all of those objectives as we come out of this period with COVID activity. If I go back and reflect on what we have done from our people first is we were the only manufacturer to continue continuous delivery of games and invest behind our D&D portfolio, including opening 2 new studios during this period of time, which you can see flows through in the Eilers & Krejcik survey on game performance and cabinet performance only published last week. If I then look at what we do from a customer-centric point of view. We have had recent NPS data suggesting that we are continuing to improve in our NPS consistently over the last period of time and making major inroads in both the size and the quality of the transactions that we're doing with our customers. And finally, about business resiliency the business is in great shape. We have continued to work hard through this period of time allocating resources and prioritization. We have focused on liquidity of the organization and also preserving -- not preserving, but making sure we have to strengthen our balance sheet and capacity for the next wave of growth at Aristocrat. We still see M&A as our accelerator of growth for our company, and we're well positioned for the right opportunities aligned with our strategy to do that. So all in all, we took the time to refresh our strategy this period of time. We've continued to execute on that strategy, and I can point to a number of points of where we've been able to do that. No doubt, Mitchell will talk today in the gaming business. And I can also talk to where we've been able to move our digital business over to -- up to a more than $2 billion revenue business now with a good diversified portfolio across Social Casino, strategy, casual genres. With Social Casino, we're continuing to take share against our major competitors in the Social Casino market and grow above the category. In strategy, we now have the #1 western title in RAID, continuing to be able to scale that product as well. And more recently, with the casual games, the launch of EverMerge, which is making great progress and is now the clear #2 in the Merge category, overall positioning Aristocrat in the Western world as a top 5 gaming mobile branch producer. So with that, Rohan, I think it's probably best we head into some questions.

Yes, fantastic. Thanks, Trevor. We have a lot of questions around growth. Obviously, we see ourselves at Aristocrat as a growth company. What growth options do you think that we have across the business and beyond this particular point in time, Trevor?

Yes. Thank you. So again, we do see ourselves as a growth company. And I think what we said -- what I said at the start there is we come out of this period with momentum. We've come out with a clear purpose and focus. If I look at the gaming business, I can still see our ability to take share. And you will have seen some of the EILERS reports coming out recently. And we're continuing to take share in the categories in which we participate. We've got adjacencies where we can enter new adjacencies, whether it's Illinois VLT, whether it's [indiscernible] VLT markets. New York lotteries, we see all these adjacencies as a natural build on the capabilities that we already have as an organization. And also the strengths that we can bring to entering those markets. So on a gaming point of view, great momentum there. I'd like to point specifically to the CX team or our customer service team, who've done a great job in developing cashless and contactless transactions for the systems business, and we can see that continuing to be able to grow as more and more of those trends become real in the retail gaming environment. If you then move to the digital world. We have got 3 strong portfolios between casino, casual and strategy and RPG. We see the ability to continue to expand into those genres and also expand in other adjacencies, which we've discussed with you in the past. During this period of time, we have been building talent. We have been bringing more talent in the organization. We've been able to secure great talent into leadership roles, but also building talent relationships as we expand in studios through Neskin and Proteus during the period of time as well. So all of that said, from our core businesses, we have the ability to continue to expand and grow. And then there's natural other adjacencies and one of those is RNG. It's a near proximity is what we currently do. It is an option for us as our other options around the industry as a whole.

Fantastic. Now in terms of the market loves a good catalyst, and there's no better catalyst than M&A. We've had a lot of questions around M&A. Particularly given the strength of the balance sheet, courtesy of those strong free cash flows that we do generate. What are your thoughts on M&A? And are there any gaps in the portfolio at the moment that you'd like to close out?

Yes. Thanks, Rohan. I think well, certainly, M&A has been an accelerator of growth for Aristocrat. If you go back and look at the 4 M&A we've done, each one of those, has been a catalyst to our waves of growth as an organization. We continue to take a very pragmatic and disciplined approach to the way we think about M&A, both from a strategic point of view and also in operations and capabilities point of view as well. We'll continue to evaluate opportunities in our markets, whether they're in the gaming market, whether they're in the digital market or whether they're in other adjacencies. We continue to be in the flow and evaluating those options, which suit our strategic objectives, which we shared with you in the full year results in our strategic review. So we continue to be pragmatic about that. We also are disciplined around the way that we create long-term shareholder value as opposed to short-term transactions and are focused on what we need to fill out our portfolio. As I said earlier, there's natural growth we've got in both land and digital, but there are also acquisitions that continue to accelerate our growth as well.

Fantastic. And one of the more popular questions we've received is around real money gaming, which is interesting given that we are actually not in there. Can you just give us a bit of a background as to why we haven't entered that market as the U.S. markets are opening up at the moment. But even historically [indiscernible] .

Yes. So we have been monitoring this market for some period of time. We do have content in the real money marketplace about 5 years ago. We no longer have any content being distributed in that marketplace as a whole. We're obviously watching the way that the market is evolving. At this stage, there's only 6 states that have legalized in North America. And I think there's a lot more headlines around what's happening in RMG than what's happening in actual traction. But we continue to monitor that and keep looking at what the options could be longer term.

So Trevor, my understanding is real money gaming, it's sports betting, it's online gaming or iGaming and the [indiscernible] lotteries. And [James Robinson] from [indiscernible] asks specifically around online gaming or iGaming. What are your thoughts around the potential to grow into that particular category given the potential overlap with content?

Yes. Well, thanks, [James]. If you go back to what we are as a company, we're a content technology and distribution company, and we make great content. We continue to support and invest in 1 technology, and we look for new ways to distribute that. So the ways that we could enter into an online or an iGaming space is with our customers. Our customers asking us to enter into those segments and producing product for them in the iGaming slots perspective. But there is iGaming spots is also keno, bingo, live table and Sports at all come towards a total portfolio. So our natural option would be to provide content, but there are other levels there. You can go in as a pure content play. You could go in as a content aggregator, which would require a broader suite than just slots or even go as a platform play. And so those options are all out there. And we continue to listen to our customers and work with our customers on what their requirements are and what they want to do to be successful.

Fantastic. Trevor, on the same topic on iGaming. Elise Kennedy from Jarden has asked, do you see iGaming as a threat or an opportunity to your Social Casino gaming? Have you seen any changes in those states that have legalized that [indiscernible]?

Yes. Thanks, Elise. Appreciate the question. That's naturally an important question when you think about sort of the headlines that are coming out on the growth rates. But to date, of all those 6 states that we have been monitoring, we've seen iGaming as accretive to the overall market. And continues to be that. Our belief is that there is a genuine option there for a different demographic and a different group of consumers to enjoy our products or to enjoy products in that segment. And therefore, we think that at this point in time, it's going to be accretive to the industry. And so far, if you look at some of those more mature states like New Jersey, which had it for a number of years now, we are continuing to see growth in our Social Casino business. We continue to see growth in that market as a whole. And we're still seeing our gaming -- land-based gaming customers are reporting good growth. It's a bit difficult with COVID, but they're still providing good growth there.

Fantastic. There maybe 1 or 2 questions in due time we will come back to. Let's move on to gaming and the land-based or the land-based operations, as many of you know, and welcome, Mitchell Bowen. Mitch, firstly, can you just provide us sort of around the ground sort of helicopter view of the market and how they're operating in this COVID affected area at the moment?

Yes, sure, Rohan. Thank you. Look, I think around the ground wasn't sort of the international business. EMEA, European, South Africa region as well as the Asia region remains largely inactive at this point for a myriad of reasons as there are some green shoots there. However, we will be, like we are in the other regions, very well prepared when those markets really start to get a bit more of activity and open up from a gaming perspective. So we're working closely with our operators there. And you come locally here to Australia, it's really been very, very positive. And certainly, a lot more positive than our original assumptions going into what this recovery would require. So when you think about historic churn levels around that 10%. Our assumptions were around that maybe 1/3 of that through '21 and then early '22 markets tracking above that. It's probably to just over half of those levels. And then our game performance and our operational performance, we're tracking ahead of that. So we're really happy with the depth and breadth of our library and our content. We've got games working from a myriad of studios across the [indiscernible] market. The cabinet mix is performing well. The sort of a tactical customer plan, Aristocrat Assist, has really started to show and demonstrate some goodwill in the marketplace. And we're really capitalizing on some share growth there. So look, I think -- and customer wise, it would be about, I would say, probably a fraction over 90% of machines that are active in the Australia/New Zealand marketplace. There's a little bit of sort of operator activity in that space, as I'm sure you're really reading about with certainly in pub land and hotel land where some of the larger players looking to buy and scale as they go. There's a bit of movement there that we're watching. But overall, we're very happy with our recovery in the Australian market. And certainly, the customer sentiment that's coming out with our game performance and mix going forward. In terms to North America, quite a similar story and that it's tracking ahead of our expectations in terms of COVID recovery. We've got about probably a fraction of over 90%, 92% of venues that are opening now. Generally between Class III and Class II installed bases, you get about 75% to 85% of the fleet that are activated at the moment. We're tracking sort of 5% to 7% above those levels, which again, demonstrates the sort of the tactical recovery plan that we put in during COVID, which is great. We are seeing higher coin-in levels than we would have anticipated. So player demand and the way operators have prioritized their marketing spend and making sure that they are looking after their patrons as they come into a safe environment, and Trevor talked about some of the contactless solutions and the cleanliness solutions that have been put in around the industry. So that's all tracking, I guess, ahead of our expectations, which is really positive. Certainly, as Trevor referenced, with the recent game performance and the reports that are coming out. We've had some great success there across both game ops and Class III as well as Class II and as well as our outright sale products with all of our studios, not just 1 or 2, but pretty much all the studios featuring in the reports. And certainly, when you start to think about 18 of the top 25 games, the trends of players coming back into known mechanics, known products and brands have really helped our recovery and certainly, our overall fleet activation as we go through there. [indiscernible] tell you about North America.

Let's go to a couple of questions. Desmond from Goldman Sachs and David from Macquarie asks, how do you see the market size over the next few years? And a good question is, has that view changed in the last 6 months?

Yes. So I think if you look at North America, historically, we've had outright sales market of 70,000 or 80,000, that's kind of the market number. And the market number coming out of that was tracking well below that at sort of about 45,000 or 50,000 range. Our views on that haven't changed. Game sales and operators use of discretionary capital is -- remaining tentative, I guess, at this point, and that's all due to potential shutdowns, lockdowns, watching the operational expenditure and those sorts of things. So I think we will look to see that a slower recovery over sort of the next 12 to 18 months in that outright sale market. That said, this sort of risk-based approach that operators are taking. We have seen, whether it's artificial or not, but there is a bit of an increase in sort of the way they're buying in terms of these leasing models and things, which they don't have to outlay that capital, but they can get great performing products on their floor, and it protects them against a potential shutdown. So we are seeing a period, too early to tell or to quantify what that looks like overall. But certainly, with our share growth in both the game sale and the gaming operations market, we are seeing some positive signs from operators. And I think it's really -- the next sort of phase, I guess, Rohan, is as other things start to open up -- I know we've talked previously about operators prioritizing what food and beverage outlets they've got on, how much of the floor they've got activated, what events they're playing, what other things consumers have to spend their money on. I think that's sort of the next piece as things start to open up more in North America, more people get vaccinated and restrictions are eased, we'll start to see what that really is doing on player demand and coin-in levels and those sorts of things. So that's kind of the next 6 to 9 months of what we think -- what we're looking at.

Fantastic. Thanks, Mitch. We'll jump in [indiscernible]

What about the openings, some of the new openings that you've been getting?

Yes. So when we talk about those -- the game sale markets and whatnot, we're certainly very comfortable with our new openings, casinos like [Saracens] and those -- where we start to think about our market share in game sales in that 18% to 20% range. Our ship share is tracking well above that. If you think about the EILERS report, we're going from 21% to 25%, and we've considerably got -- grabbed much higher than that in our new openings. So with our -- with that COVID assist package or Aristocrat Assist package, our focus on customers, our breadth and depth of our library, we are really starting to see some fantastic momentum for us in North America.

We've got operational financial support, fees sort of added a fair amount of goodwill with the customer, and I know that's part of customer centricity as a key platform in Trevor's COVID -- Trevor's COVID response. In terms of the game flow and I know it changes from market to market, even within actual corporates themselves. Have you seen the change in the mix, Mitch, between lease and outright sale sharings in the American market?

I think, again, I think it's important to understand the segmentation of the operators. So I think we've talked about previously, we track fantastic share and are overweight in our regional and travel properties and then underweight in our sort of corporate destination style venues. But importantly, even in markets like Nevada or New Jersey, we are seeing some strengthening demand in those sort of destination style of markets as well, which is positive. I think from an overall financial perspective, when we think about operators and their mindsets, they are tending to think about how they can mitigate their risks or minimize their risk going forward, which has led to this, I'm going to call it temporary, because it's too early to say it's a trend at this point, but certainly, an increase in a lease or gaming operations footprint, and we've certainly seen some increases in those products over the last 6 months or so.

Yes. Thanks. The industry has been very supportive by a number of pieces of independent research and EILERS we refer to on a regular basis and share that. Todd Eilers, I believe, may be on the call today. In the last survey, we saw gaming ops -- 2 surveys ago, we saw gaming ops come off. And then we saw an installed base increase. Yet, some of our competitors [indiscernible] some of those units taken off the floor. What's your read on that gaming ops market at this particular point in time and how do you see us positioned?

Yes. I think, Todd, as long as we're at the top of the chart, keep those reports coming mate. Keep those surveys happening. But no, I think as much as we love that certainly are just that. They are a sample of the overall market. And I think where we've seen some historic growth on markets like the East Coast and some of the southern states of where we've increased some share. And so you will see some volatility in with a sample set like an EILERS report versus what we're seeing in our own internal data. But certainly, on an MAT basis, on a quarterly basis, we are seeing some great momentum in our gaming operations status.

In my time, Mitch, at Aristocrat, the surveys sort of moved around, but there's been a fairly consistent trend. The last survey looked pretty phenomenal churn from a company perspective, whether it be game sales, gaming of new game releases, cabinets, et cetera. What's your take on those recent survey results?

Can we do virtual high fives? No, we can't do that. What I would say is, I think we've spoken previously around some of the decisions we've made during COVID around the investment in -- or continued investment in our D&D studios and making sure that not just D&D, but we've got a resilient supply chain and we've got people focused on customer and operating needs because everybody was different. But then obviously, making sure that we continue to invest in our R&D, both hardware, software and our services because we know, you guys know that we're only as good as our next game, our next cabinet, our next hardware or service, all those sort of things. So at the risk of sort of eradicating complacency and continue to drive innovation excellence, we maintain that investment. And we're now seeing on those -- if you take those performance report, one of the nice things that so we, as a management team and as all our staff internally is it represents the breadth and depth of all of our studios, right? It's not just 1 or 2 across the board. And so whether it's talent that we've brought in the last couple of years or it's talent we've had for the last 10, they're all featuring in some way, shape or form, in not just the gaming operations or the game sales, but some of those adjacencies that Trevor talked about. And we'll continue to see that as we invest and go into more and more of these adjacencies. So the breadth and depth of talent and capability as well as the library, the portfolio, the content, game, services and so on, has really sort of been the highlight for us which really shows the sustainability of how we can continue this going forward. We're not reliant on just 1 section or 1 product segment or 1 studio. We're performing across the board. And so that's personally, what we talk about is how do we make sure we maintain that and continue to innovate and grow in them and deliver customers the next great game or the next innovative cabinet or solution in order to continue to take share and grow.

Yes, fantastic. And obviously, just to reiterate the outlook statement we had around our aspirations around taking share and continuing to grow regardless of the market size. So thanks for that, Mitch. Let's move on to our digital operations, which is -- it's been a successful diversification strategy over the last few years which is really tested during COVID. And Trevor, can you just talk about, first of all, the overall performance and what you're seeing in social casinos?

Yes. Thanks, Rohan. So we -- I think we've spoken to investors a few times about what we needed to do to address our Social Casino business, and that really took effect in January last year. And we've seen that momentum build through to hold the last 12 months and continues to stay very, very strong. So we are taking share against our major competitors in Social Casino. We've seen growth in -- particularly Lightning Link and Cashman and also seeing good performance out of the rest of the Social Casino business. So I feel very good about what the team has done in Social Casino, [indiscernible]. But we now have ease of use or diversification in the context of our overall business, but only didn't say that diversification now is across the whole digital business with a strong portfolio in Social Casino. #2 in its category, #1 in the strategy and RPG category and showing some real traction to being a stronger casual player with the #2 in the World segment and certainly continuing to grow and grow that segment as a whole. So I think the team has done a great job, particularly around features, live ops and built on that, and that was a gap we had. And we've definitely built that skill set and continue to be able to leverage it. If I look at performance year-over-year, I feel very comfortable about the step-up that we saw through COVID as being a more of a permanent step-up in what we potentially have bought initially. And that certainly is continuing to flow through on a long run basis.

Fantastic. We talked about the portfolio and we developed gains for the portfolio, top line growth, but you've got to be lucky as well as good. And we organically have developed a world-class game in RAID: Shadow Legends in the sort of strategy RPG area. Bryan Raymond from Citi has asked about the performance of RAID. And has that plateaued now? Or do you see continued growth from this particular franchise?

Yes. Thanks for the question, Bryan. Look, RAID has been a great product, and it continues to keep growing. We are in a cumulative profit stage now. So we're still seeing growth, but we're also seeing profitable growth coming through from a cumulative profit basis. RAID is sitting somewhere between $30 million and $35 million a month now as a business -- as a product, sorry. And we continue to see ways to use unique UA investments. So we are still spending strong UA, but we're using alternative ways to do that to drive new users. And we're finding that, that plus the incremental features that we released earlier this year around Tower and some of the new extra characters that have been added in have actually brought in more depth to the game and continue to see it growing. So I still see growth in the RAID franchise. Obviously, not at the rates that we've been experiencing because it went through a very steep growth curve. But certainly, the product is differentiated. We're able to continue to reinvest in new and creative ways to attract users. And we're finding that the cohorts that have come in are staying in the game for a long period of time.

If we look at -- you touched on diversification within in the digital business, Trevor. And it's seemingly unusual when you look at other public listed digital companies that can actually grow world-class games in different genres. But it appears as though we've done this again with EverMerge in the casual segment. Can you just give us an update on EverMerge and its performance since its worldwide launch?

Yes. So we launched EverMerge in May, soft launch last year in May and continued to scale. I think last time we spoke to the market, we were guiding towards $5 million to $6 million a month in booking. That's probably closer to the $10 million now. And we're continuing to see that product scale. There's lots of new features coming out. There's some very good activity during the Valentine's period in some of this new island contexts -- concepts that are out there. But we are in that Merge category. We knew it was only a small category when we entered it. We're growing the category, and we're also taking share. So we're into the 20s as far as -- 20% shares and continuing to see an opportunity to continue to grow. And I feel very comfortable both the relationship with Neskin, which is a new strategic relationship for us. The team is focused on how do we grow and aggressively grow that segment. You put that, you put Lightning Link and you put RAID together, and there are 3 very strong portfolio games that any digital business would like to have. And each of those are -- certainly Lightning Link and RAID are at profit stage and EverMerge is not that far away.

Fantastic. Trevor, [indiscernible] and Suthesh from UBS is asking, can you provide an update on the gaming pipeline?

Yes. Thanks, Suthesh. Look, we've got about 4 games that are close to soft launch or very close to soft launch. And as you know, we get these games into soft launch. We continue to tweak them and monitor them. And some of them, like Mech Arena are certainly showing good retention signs now and it's moving closer and closer towards mobile launch. So we've got about 12, 15 games in the pipeline at any point in time. We've now got about 4 that are in soft launch. We got 1 of those being Mech Arena, plus a couple of others in Magic Wars. And Coin -- not Coin Heist, 8 Ball Smash, which are all sitting in the pipeline. And so I think at this point in time, you would probably expect to see at least 1 come to market this year, maybe 2 depending on how the soft launch metrics go.

One of the potential business risk for the digital business is the uncertainty that is IDFA. Sacha from Evans & Partners has sort of asked, what's the latest view around IDFA and what do you expect the impact to be, particularly on the Social Casino and RAID?

Yes. Thanks, Sacha. So as of last night, feedback from the platforms is that IDFA appears to have been delayed again, and it's looking towards late spring before we'll have more certainty on that. We had no formal advice on it, but we have conversations with the platforms, and we continue to talk with all stakeholders in the platform, not just Apple, Facebook and Google, but to understand what's going on. So we believe that, that has been delayed because it was originally going to be sometime late March. We definitely had no indication on what's happening from that perspective. If you talk about what does it mean for us. We actually think this is where scale actually works for you. And having a scaled business, a diversified scale business provides us a lot of opportunity. We've been working on various strategies around how do we market our products to users in a post IDFA world, and we've been running trials. And some of those trials have been very successful if you look at RAID. Some of the activity we do with RAID at the moment is TV advertising. And it's driving very strong -- it's driving good strong traffic to the app itself. So we're looking at other alternatives like that. As we said, we've been talking with the platforms, working with other platforms to work out what their place and position is going to be. And I think what's happening at the moment is that we've done a lot of work, a lot of data science, a lot of testing to get ourselves comfortable. But we believe we're well positioned for our post IDFA world. We don't believe we're competitively disadvantaged because of either the portfolio we've got or the size that we are in the organization as well.

[Andy] of [indiscernible] has just asked, when we say delayed late spring which hemisphere are we looking, Asia Specific, recognizing that it's been delayed 3 times now, but that's a specific online question I've just received.

Great question, Andy. I was talking to people in London. So let's call it Northern Hemisphere spring.

Fantastic. So it seems Big Fish, Plarium and RAID was adding some tremendous organic growth, a real differentiator versus some of our public listed peers. But obviously, we've fast-tracked and accelerated that growth in the past 5 M&As with those examples. So David from Macquarie has asked, can you scale up the business with studio deals or would you need to acquire more businesses, Plarium, Big Fish et cetera?

Yes. Thanks, David. Sort of playbook that we've been using for the digital business to date has been to scale our technical talent, creative talent like we do with our land-based business. And that's where you've seen deals with Neskin, Proteus, and there are others that we're working through at the moment as well to bring new talent to build out our capability. We -- if you look at the genesis of who we are as a company, we are creating -- a creative company. We make creative things. And we bring talent in. We provide them the canvas, if you like, to be able to make that creative product. And then we go and market and distribute it and merchandise it for them, if you like. Is there opportunity? I still think there's still good talent deals to be had, and we are talking to talent that we would like to have join Aristocrat Group, particularly in the digital space. We're also talking to talent in land-base as well, to be frank. At the same time, there are opportunities for buying businesses. I guess where we're seeing digital business at the moment as the multiples are pretty high. And the one thing I do like about our digital business compared to most digital businesses is we're still making 30-plus percent profit margins, which is different to a way a lot of the digital businesses operate where they're more focused on revenue. Where we believe we can grow revenue above category, and we can grow margins. And so we'll have a much stronger and more profitable business longer term. So it is there, David, it's just a little bit more aggressive as far as pricing goes at the moment. That doesn't stop us from looking at many different targets over the last couple of months.

That's interesting. We don't actually look at the diversification benefits that I think the best-performing game in Cash Link, it's in our app right now it's from our land-based Cash Express. So it's great to see the synergies happening in 2 ways. In terms of a risk mitigant for IDFA, it is utilizing different platforms. And we have our own platform in Plarium Play. Trevor, can you talk about how Plarium Play is performing? And is that a potential growth option for the business on a go-forward basis?

Yes. So Plarium Play has been around for about 15, 16 months now. I think it is maybe slightly longer. It's the online PC platform, we've really been using RAID as the catalyst to grow that platform. And from what we've seen to date, that has really nicely scaled in each month. Incrementally, we're getting more users into that platform. As I may have mentioned before, the team at Plarium currently reminded me that this is 1 business where gross revenue equals net revenue. So there's no platform to be involved, and they're very conscious of that opportunity. That has scaled nicely, and I think it still continues to offer us opportunities for scaling. It is a more loyal player base and also there's an opportunity there potentially to publish more content through that platform, consistent with the type of genre that they currently use as a [indiscernible].

Fantastic. Let's move on from the operations for the time being. And let's move our attention towards ESG. ESG is really important. It's important to our people. It's important to our suppliers. It's important to the community, and it's important to you, our investment stakeholders. And with that, I'd welcome Natalie Toohey, our Chief Corporate Affairs Officer, to cover off a few questions, if I may, Natalie, and welcome. [indiscernible] is asking, how does Aristocrat actually incorporate ESG factors into its operations?

Yes. Thanks for the question. I guess I'd probably start by stressing what we don't do and what ESG isn't at Aristocrat, and I would say it is absolutely not a kind of corporate led exercise or an exercise that's predominantly about PR. What we're very much focused on from a group perspective is bringing the right level of insight and impetus, if you like, to the organization on these issues. But it's a business that's accountable for delivery. And the focus is very much on improving core business systems and processes and taking actions that make us a better and a stronger business and are really aligned to the strategy. So really facilitate delivery of strategy. So just to make that point, I guess, upfront. We're also -- we also take a very disciplined approach in terms of focusing all our attention on the issues that are really material for our business. So the thing that obviously, drive value or could stop us from executing strategy and capturing value. And we do take a lens in making that assessment, which is not only about our business today, but also how we expect it to transform and the views of our people and as Rohan mentioned at our stakeholders, including our investors and perspective investors. So in terms of where we're focused right now. We have those 6 key areas, which I encourage everybody to kind of explore on the website in our disclosures, responsible gameplay being our most obvious leadership opportunity and biggest -- and a real strategic driver as well. Corporate governance, community and society, keep people first aspects of employee relations, diversity and inclusion and also ethical sourcing, which includes modern slavery commitments, ethical supply chain and finally, energy and environment. And I guess with respect to each of those topics, we've got very clearly articulated objectives that sit with leaders across the business, articulating what we are wanting to achieve in terms of progress. All of these agendas, I think it's fair to say are -- you don't -- it's not a one and done. It's an ongoing exercise of making improvements and then planning further improvements off the basis of those. So we definitely take a kind of a medium term view. Albeit we do drive for progress, very specific outcomes on an annual basis through this performance management system. We also apply a broader risk lens to what we're doing in total. So we do periodically check in with our enterprise risk. In the Board level, the Board endorsed risk appetite statements and we plug into the ERM in terms of the overall management of the asset. So it's very pragmatic. It's very much focused on embedding and improving through our core systems and processes, and it's very much business led. So I guess just perhaps a couple of examples, measurable improvements in our diversity and inclusion performance is an example of what we're shooting for currently, complying fully with our modern slavery disclosure obligations, continuing to lift the bar in terms of our governance and really being leader in terms of governance and bringing forward product innovations in the responsible game play space and driving a culture really of engaging with responsible game play. So pragmatic, practical, targeted and business led would be my summary.

If you have a look at ESG, there's in a number of plans. And [indiscernible] would be responsible game play is the most critical. But I think it's almost as important just to take into consideration that gaming into state-by-state regulatory body and therefore, compliance and governance is really super critical, and we're seeing that play out in recent times, both locally and internationally. So I would never sort of cross over those particular areas. But in terms of our way forward, Natalie, what do you see the priorities for ESG are over the next 6 to 12 months?

Thanks, Rohan. So I guess, from an overarching perspective, we're currently focused right now on updating our materiality assessment. We last did that a couple of years ago. So clearly, the business has transformed in the interim. And plenty of other things have changed in our external environment and also internally. So in terms of stakeholder expectations. And I do know that a number of people on this call do participate and shared your views as part of that update process. And I just want to say thank you because it's excellent to have a strong investor voice and perspective coming through that helping us -- guiding us around which issues we need to focus on going forward. So thank you. I think from an issues perspective, it's many of the things that I called out -- I've just referenced. So continuing to operationalize our commitments in responsible game play. In other words, taking those kind of policy statements and aspirations and really embedding them in the core operational processes of the business, whether that's around product, whether that's around marketing and how we go-to-market and engage with customers, whether that's around things like staff engagement, culture, training and compliance. So many, many threads to the RG assets. And what we're really focused on is making sure that we are doing what we say we will do and really embedding those very much into the core business processes and functions. We've got a number of functional, very senior functional -- cross functional leadership groups that are helping us kind of really drive that through the business. So again, very business driven, whether that's at a product level or, as I say, on other issues. I think we're making very good progress, I would say. And we're really looking forward to bringing more color to that progress when we release our next iteration of disclosures towards the end of the year. I think we're doing -- we're making really great ground in digital. I think we're actually already very clearly leading in Social Casino in terms of the RG initiatives that we brought to bear already. And if you look at what we're doing in gaming, we've hit a really exciting milestone recently with the commercialization of Flexiplay in New South Wales. For those who don't know, Flexiplay is an innovative EGM product that built on previous trials, and we've got a real track record of investing in trials and product innovation in this space. And it allows players to voluntarily set time limits and to also quarantine winnings. So to prevent them from being played down. So our customers have been very interested in and supportive of these sorts of initiatives from us as our policymakers, regulators. And we're really looking forward to learning more from this and using those lessons to really feed in further product innovations in the future. A couple of other priorities, I'll touch on briefly. We're spending a fair bit of time at the moment, really understanding our greenhouse gas emission profile as a business. I mean, as Trevor mentioned, we're really an ideas business at heart. So we don't have a kind of a particularly obvious kind of heavy carbon profile. But we really feel that in addition to delivering on the TCFD, our response to the TCFD and our program of disclosures there, that we want to do more work to really get underneath our profile and what abatement options could look like to really background future decision-making in that area. So we're spending a fair bit of time on that now. We've also submitted our first modern slavery statement for Australia, which is a pretty hefty piece of work and a hefty disclosure. We understand that will be published at the end of the month. So that's been supported with management staff training and a lot of other activities. But again, another very important focus for our business. And I'll probably just end by mentioning the raising of the bar on governance, as Rohan mentioned. Governance really is the most important thing that you can do well that you must do well for a business like ours. You may have seen that we recently appointed a former Nevada state regulator and actually a globally influential and credentialed gaming regulator, A.G. Burnett to the Board's Risk and Compliance Committee as an independent member. So our expectation is that A.G. will bring some real rigor to -- or just really add to the rigor and add new perspectives to the deliberations of that committee. So we're continuing to look for what we can do to bolster and further improve and really innovate in the governance space to keep the risk rate at the forefront. So -- but there are a few examples. Clearly, it's an enormous -- digitally enormous agenda, we are trying very much to continue to focus on what moves the dial in our business and for our stakeholders. And always with a very business-led lens rather than a PR one. It is a journey. It is iterative, as I mentioned. We'll continue to do more as we achieve more and build on those foundations. But we're very pleased with where we are at the moment and look -- really looking forward to bringing forward a new round of disclosures on their annual calendar.

Fantastic. Natalie, thanks very much. And we do look forward to sharing those achievements that the teams collectively across the globe are putting together in an ESG. We really feel as though we are the responsible guardians of the gaming industry, and we're going to lead accordingly, which is fantastic. And we know we've got the full support of both Trevor and the Board in this particular area. Now we'll just touch on a couple of financial questions briefly. And they are around, #1, SG&A; #2, tax; #3, liquidity. All exciting stuff. Sacha and Peter Marks from Morgan Stanley. [indiscernible] have asked around an increase in SG&A across the business considering bad debt, provisions, redundancy costs, et cetera, et cetera. So the 24-pronged question in relation to SG&A. Please, the key takeaways here around SG&A is that this is a growth company, and we will invest to grow. Pre COVID, we had a number of projects for sustainable growth over the longer term. During COVID, we had to make some decisions to pause and reprioritize those tasks. We took -- mainly took some temporary costs out which we returned back into the business, where we're going to continue to grow in areas such as IHC as well as CX or systems that Trevor touched on earlier as well as D&D. Now if you have a look at our business, we're largely an asset-light fixed cost business, those costs center around talent, innovation and design and development in particular. We have an unwavering commitment in that particular area. So yes, it will increase our cost base, but we see it more as an investment in the long term. In terms of the provisions in September 2020, we did say, look, in hindsight, we hope that if we are going to be criticized for anything, it's staying conservative. That may play out. But what we saw at the moment at September last year, we saw half of the global market closed, including Australia, with Victoria in shutdown, we had Latin America closed. We had Asia closed, Europe closed, et cetera. So we did make some of those provisions, particularly around doubtful debts. And we're hopeful that they may not continue. But obviously, we'll have a rigorous test around our period end around that particular area. So we will continue to invest in SG&A. We don't anticipate the quantum of provisions to be as significant as they were in the past. But we do acknowledge that we do face an FX headwind coming through. I'd refer you to the notes that the accounts in the annual report, where $0.01 is around $12 million NPATA. So we are up against some headwinds, which will offset any benefits from not providing additional provisions. In terms of tax. Now we're going to scratch the surface, but we're not going to go too deep because you probably got the wrong person involved in this response. We had a question from Rohan Sundram, of MST Marquee and David Fabris from Macquarie around the potential tax increases in America. Yes, we saw a change in government. Yes, we saw the Democrats considering talking about an increase in corporate tax from 21% to 28%. They have sort of settled down, although we do understand that there's more steam, so there's potential for that effective tax rate to go up over time. America is a very significant part of our business. It's around 70% of both gaming and digital in a normalized market. So if you saw an effective tax rate increase. All things being equal, you would see a rise in our effective tax rate on pro rata -- on a weighted average basis. However, what I would refer you to is the [indiscernible] accounts. Now it's 1.4 where we have about $1 billion in deferred tax assets. In the event of an effective tax rate increase, you would see the value of those assets go up to offset to a large degree. So the bottom line is that we may see an effective tax rate increase over the longer term, but that would be mitigated by the access to those deferred tax assets. Finally, in regards to liquidity. Liquidity was a key platform as part of the COVID response. And we wanted to make sure that we can turn the line and we wanted to be there for our people. We want to be there for our suppliers. Now some companies took the path of raising equity and permanently diluting shareholders. We took the approach of temporary raising debt. We increased our revolving credit facilities. We also took out an incremental term loan of around USD 500 million. The only downside to that is that we had to draw all that cash down. And so putting that money to work has been challenging, but it is reflected in that outlook statement around the effective interest expense of around 5% throughout FY '21. So it's a great problem for us to have. It's something that we will work through over time when we feel ready. But that's something that's work in progress for the broader team. In the event of no other questions, I'll hand over to Trevor for a bit of a wrap-up from his perspective on how things are performing in the first half of [indiscernible]. Thanks, Trevor.

Yes. Thanks, Rohan, and thanks for your time. I'd probably put it into 3 or 4 buckets. So first of all, I'm very impressed and very happy with the real traction, sustainable traction that the business has achieved for this period of time. Now we thought we were going to be achieving certain things, and we're certainly ahead of expectations, largely driven by a clear purpose and strategy. And excellent execution across all the organizations. So from that point of view, we're getting really sustainable traction, which obviously, it's ahead of my expectations. But then think about the second part is we're really -- well now -- we're now really well positioned for growth as the industry starts to rebound. The question about what's going to happen as people start to travel and casinos start to reopen, et cetera, et cetera. Aristocrat is well positioned, not just from a product portfolio, but from a customer relationship point of view, from the ability to invest and support our customers to reopen and grow. And our digital business with the momentum that's still continuing to be there for RAID and also building on EverMerge. So I feel that the business is actually well and truly positioned to take advantage of the growth opportunity that's going to come as people start to renormalize their lives post this period of time. The third part is the diversification. as we talked about a couple of times. But if you think about what diversification has done for Aristocrat through this period of time, it strengthened our company. It's made us a better company and it has given us a lot more optionality than we would have had if we had been a pure-play gaming business. And to have a scaled digital business and a scaled gaming business now gives us a lot of options, both to reinvest in what we've got, to continue to build on our financial strength or to grow M&A in either of those businesses or other adjacencies that we wanted going forward. I think now at this point, governance is still such an important part of a good organization. Good organizations, have good governance. And governance can be an enabler. People often see governance in these regulatory and riskier aspects as a slowing down of an organization. We see our social right to operate as a very important part of who we are as a company. And we're building a very strong and continuing to build a very strong culture around governance and leadership with that as we -- as I said earlier, we want to be a leader in the industry. And being a leader in the industry means you lead in all aspects of the industry. I mean finally, I guess, I'll just come back to where I sit on this whole thing, I've said it a couple of times, but it's no more apparent to me today than ever before as the next 10 years at Aristocrat are going to be better than the last 10 years. I can point to so many small things that cumulatively give you that confidence. We only have to go back a week and pull up the EILERS surveys and look at our game performance and share of games. If you look at the cabinet performance, you then look at how the digital business is actually going and building momentum. This business is poised for continuous and strong growth for the next decade. And I'm more confident now than I've ever been about the ability to continue to grow this business. And it's not just a 1 year. We built this business for long-term growth. This is not about just making at '21 number or '22 number. We believe we can continue to grow this business for a long period of time. And that's what guides all of our investment decisions in our strategy around how do we continue to build long-term sustainable growth. So I'm even more bullish as I sit here today about the future of Aristocrat for the next 10 years.

Outstanding. A great wrap up. We do have 2 last questions, one on gaming and one on digital, conscious of time if I referred to. So first, Mitch, Larry Gandler, our friend Larry from Crédit Suisse in Melbourne. And then just a clarification around gaming operations are some of the for-sale products now being leased in the U.S.?

So Larry, I would think about that as some of the for sale products now being leased? Yes, but more operating leases. So they're starting to minimize their upfront capital and take a fee per day on content versus buying the whole thing outright to kind of maximize their optionality. So yes, but it's not a huge number at this point.

Okay. Fantastic. And final question on the digital, Trevor from Sacha of Evans & Partners. Can you give an indication of how PC bookings for RAID contracted?

No, Sacha, they continue to grow every month, and they've grown off a very small number. And it is a small number, to be honest with you, but the percentage of growth is extremely positive. And very satisfying to see them continue and growing every month. And we're seeing month-on-month compounding growth in the player and play platform. As I said, it's only a very small number at the moment. It started off from 0 about 15, 16 months ago. But it is growing and it's growing at a very fast rate. And I don't know if they will be a big -- as big as people think platforms can be. But certainly, it's a nice accretive part to our business, and we're learning a lot about how to distribute and present product in a PC environment. So very happy with the growth rate on that.

Fantastic. Thank you, Trevor. Thank you for all those questions. And for all those people who have reached and given up your time to invest in Aristocrat. It would be remiss of me not to thank a couple of people behind the scenes including Claire, Linda and Francis, for their support. We greatly appreciate it. It is a collaborative team effort here at Aristocrat so we really appreciate it. We always welcome to receive constructive criticism or advice and guidance in terms of where this is effective use of your time and where we can improve the process on a go-forward basis. But in the meantime, I'd just like to close out. Thanks, everybody, for your time today. And for those people traveling locally, travel safe. And we look forward to talking to you at our half year results on Monday, May 24. And with that, I'd like to close the meeting. Thank you very much. Have a great day.

Thanks, everybody.

Thank you.