Light & Wonder, Inc. (LNWO) Earnings Call Transcript & Summary

Welcome to the Light & Wonder 2025 First Quarter Earnings Conference Call. [Operator Instructions] I will now turn the call over to Nick Zangari, Senior Vice President, Investor Relations and Treasury. Please go ahead.

Thank you, operator, and welcome, everyone, to our First Quarter 2025 Earnings Conference Call. With me today are Matt Wilson, our President and CEO; and Oliver Chow, our CFO. During today's call, we will discuss our first quarter results and operating performance, followed by a question-and-answer session. Today's call will contain forward-looking statements that may involve certain risks and uncertainties and that could cause actual results to differ materially from those discussed during the call. For information regarding these risks and uncertainties, please refer to our earnings materials relating to this call posted on our website and our filings with the SEC. We will also discuss certain non-GAAP financial measures. A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our earnings release and earnings presentation located in the Investors section of our website. With that, I will now turn the call over to Matt.

Thanks, Nick, and thank you all for joining us today to discuss our first quarter results. Our focus on a comprehensive product road map, operational excellence and cross-platform strategy has enabled us to return to double-digit, consolidated AEBITDA growth, pacing us towards our year-end target. I would like to recognize our team that performance and relentless efforts to execute toward our financial and operational goals. As we outlined in the previous earnings call, growth in 2025 is expected to progress and weigh towards the second half of the year based on our visibility into the game sales funnel. We are focused on what we can control, and the teams are working diligently to adapt to the rapid shifts in the broader economic environment. Importantly, our game performance is reflected in industry charts and supported by our customers, showing we are on the right path. With uncertainty in the current markets, we will stay the course to reinvest into R&D for sustainable growth in the future. While this industry has proven to be resilient time after time, we are not immune to ripple effects from operators and the end consumers should we see a long-term structural shift in policies resulting in a softer macroeconomic environment. However, I remain optimistic about the future of the gaming industry and our position to capitalize on the opportunities with our product portfolio, which continues to be a key driver of our performance. Let's turn now to the operational highlights. Our gaming team continues to leverage our product portfolio and content road map, driving yet another quarter of growth across all lines of business. During the quarter, we added approximately 500 units sequentially to our North American installed base, bringing the number of added machines to over 2,900 units year-over-year. Our North American gaming operations footprint is now over 34,000 units with 51% of the fleet as premium. The diversity of our franchise is paying dividends, and the most recent Eilers chart reflects this with Light & Wonder holding 40% of the top 25 new premium and WAP games in the first quarter of 2025. Game sales continues to be a highlight with over 9,700 global units shipped in the quarter, driven by share gains that we've made since we started on this journey. We exited 2024 as the #1 ship share supply globally and carried that momentum into the first quarter. We're gaining the #1 position in Australia underpinned by the variety of game franchises we have to offer, such as Shenlong Unleashed and Lightning Gongs as well as Huff N' Even More Puff, which debuted as #1 in Queensland Club. In North America, games from proven evergreen franchises such as Super Hot Flaming Pots, Mr. Lee & Mrs. Wong, both ranked in the top 5 of new core games. In the COSMIC upright cabinet, the top performing portrait upright cabinet are prime examples of great performance during the quarter. This improved game and hardware performance is evidenced through a 400 basis point share gain for North American game sales in 2024 year-over-year to 24%. Our systems and table business continue to deliver healthy results as a result of a strong portfolio. We expect to drive further innovation through our experience and leadership position into sustainable growth across these product lines. Since the beginning of the year, our Chief Product Officer, Nathan Drane, has also turbocharged our game launches with a robust road map of games coming across cabinets on both the gaming operations and game sales categories globally. We anticipate the pipeline to continue to build upon itself and propel us forward as we execute our strategy for further upside in the gaming business. On to SciPlay where we continue the trend of outperformance relative to the broader social casino market, year-over-year for 3 years and counting. Mobile gaming is a large market, and we will continue to find avenues to grow our portfolio sustainably. This quarter was impacted by a late quarter reacceleration from the Jackpot Party updated game economy highlighted in our previous earnings call. We have seen continued positive signs of player engagement with the new economy in March and feel confident in its growth trajectory and the return to growth in the second half of the year. Importantly, the significant insight into the performance and the information we gathered enables further opportunities to drive efficiency and leverage these learnings across other games. Importantly, we saw growth in other games as Quick Hit Slots was able to achieve its 13th consecutive record revenue with 15 consecutive quarters of growth. While 88 Fortunes also reached 3 consecutive quarters of record revenues. More broadly, we are focused on the key SciPlay initiatives, which include user acquisition, monetization and direct-to-consumer. Regarding UA, our team is committed to staying fluid and maximizing the opportunity when it counts. We continue to scale monetization by leveraging dynamic Live Ops through the SciPlay engine, with the year-over-year growth reflected in average revenue per daily active user and average monthly revenue per paying user metric. We also have exciting updates to share on our DTC platform and how we plan to grow, which will further unpack at our upcoming Investor Day. More than a year ago, we introduced DTC to our players and have received very positive feedback since them. We've been cultivating the platform to ensure seamless and optimized customer experience, and we'll continue rolling out this offering in phases and eventually onto our other games in the SciPlay portfolio. Looking forward, our team is committed to the fundamentals of the business and to the long-term sustainable growth. We will continue to focus on high-return, prudent U.S. spend while improving monetization in the core portfolio titles. This growth will be compounded by the methodical scaling of our DTC platform, supporting margin expansion in the business for years to come. Turning to iGaming, where we see continued success in both first-party and third-party content launches as well as added service capabilities, which further enhanced the value proposition of our offering. Additionally, growth was accentuated and evidenced in all markets led by market GGR increases of 30% and 11% in the U.S. and Canada markets, respectively, year-over-year. Content creation and cross-platform deployment is core to our strategy. We are building on the momentum in the U.S. supported by strong, new third-party game launches, including Huff N' More Puff and Wizard of Oz - Over the Rainbow in the quarter. These are exclusive launches with FanDuel and BetMGM, respectively, and that set new single-game GGR records for both operators since their release. We expect these games to be more widely distributed as they come off exclusivity shortly. Additionally, land-based fan favorite Huff N' More Puff achieved record North American GGR volumes across the OGS on its initial 60-day release. A testament to the power of our game portfolio and brand exposure of a tested, proven franchise. We expect the runway for our third-party content to continue to broaden as the overall iGaming market grows and as we expand our presence with the introduction of ELK games in the fast-growing Ontario market. In terms of our service offerings, we continue to see a proliferation of that business with operators. Recently, we launched marketing jackpot in New Jersey with additional rollout plan. Furthermore, we see validation that our products provide substantial value to customers through securing the player account management and aggregation platform tender for the finished lottery. Overall, I'm pleased with the vision, strategy, execution and leadership Simon Johnson has brought to the business. We've made some important strategic decisions under his leadership that will ultimately bear fruit in the long term. The renewed focus on high-return initiatives such as cultivating first-party content and leveraging our deep pool of diversified game franchises is expected to drive share gains moving forward. Back in February, we announced the strategic acquisition of Grover Gaming's Charitable Gaming assets, which is expected to enhance our role as a leading cross-platform global games company by adding another growing regulated market to our portfolio. Licensing approvals are on track, and the transaction is anticipated to close by the end of the second quarter. Preliminary integration and planning efforts are proceeding as planned, and we are preparing to bring the team on board. We view this as a strategic growth driver for Light & Wonder. Just recently, the State of Indiana legalized e-pull tabs effective July 1 of this year. This is a welcome tailwind and incremental to our base case assumption. We're excited about the sizable opportunity and intend to be competitive in the state with our R&D supported games and hardware. You will hear more from us on our integration and growth plans for Grover with the upcoming Capital Markets update. As it relates to an update on our ongoing litigation, back in early April, we engaged a third-party expert, who conducted an audit of hold and spin games released after mid-2021 to determine whether any of those games presented similar issues to those identified with Dragon Train and Jewel of the Dragon. He found no evidence of Aristocrat math values being used in any of those games. We expanded our review to include hold and spin games released before mid-2021. We have now completed searches of math models for hold and spin games released between 2015 and mid-2021 and found no evidence that Aristocrat math values were used in any of those games. In closing, I'm very excited to be hosting our Investor Day in less than 2 weeks' time, where we use the event as an opportunity to dig into the fundamentals of our business and strategy to help propel our growth in the coming years. We look forward to seeing many of you in New York on the 20th. With that, I'll now turn it over to Oliver for a discussion on our financials.

Thanks Matt. Our commitment to operational excellence and continuous improvement is reflected in our first quarter performance, and we expect this to continue as we execute towards our 2025 targets. The initiatives and processes we have in place enable us to remain adaptable to changes. While the uncertainty in the current environment persists, we are focused on execution and sustainability in the long run. This quarter marked our 16th consecutive quarter of consolidated revenue growth, a 2% increase to $774 million compared to the prior year, driven by our gaming and iGaming businesses. Net income was $82 million as increased revenue and margins were offset by higher restructuring and other expenses, primarily related to costs associated with pending acquisitions and discontinuation of live casino operations. This resulted in diluted net income per share of $0.94 compared with $0.88 in the prior year period. In line with guidance provided in the last earnings call, consolidated AEBITDA in the first quarter grew double digits, increasing by 11% to $311 million compared to $281 million in the prior year. Our continued business optimization led to increased revenue and expanded margins across all businesses resulting in a consolidated AEBITDA margin of 40%, a 300 basis point increase over the prior year period. Adjusted NPATA for the quarter was up 11% year-over-year to $117 million on revenue growth and margin expansion, partially offset by higher income taxes. Adjusted NPATA per share or EPSA increased 21% to $1.35 compared to $1.12 in the prior year period. Operating cash flow increased 8% to $185 million in the quarter, leading to a 19% increase in free cash flow to $111 million, reflective of strong earnings and lower CapEx partially offset by unfavorable changes in working capital, inclusive of higher cash income taxes paid of $24 million. Turning to our business segment performance. This quarter is another example of the efficacy of our core strategy of creating great content and a diverse product offering. Gaming revenue was $495 million in the quarter, a 4% uplift bolstered by growth across all business lines of particular strength in tables, gaming operations and systems. AEBITDA grew 9% to $254 million, a result of improving top line in conjunction with margin expansion of 200 basis points to 51%, demonstrating our ability to increase margin while investing back into the business. Gaming operations delivered $173 million of revenue in the quarter, a 5% increase year-over-year. Our North American installed base increased by approximately 500 units sequentially while maintaining an average revenue per day of over $48, which was adversely impacted by weather, primarily in the Northeast. Internationally, the sequential installed base impact was attributed to lease-to-sale conversions, mainly in the Lat Am region. Global gaming machine sales were $208 million in the quarter, up 1% year-over-year, primarily from strong performance in the North American replacement market where we shipped 26% more units compared to the prior year period, closing in on 5,400 units. Internationally, units were impacted by elevated sales in both ANZ and Asia in the prior year. As Matt mentioned earlier, we expect game sales this year to be back half weighted with ample opportunities for us to commercialize our expansive library of content and hardware. Importantly, our global average selling price of nearly $20,000 reflects the value and premium on our cabinets and games. Systems revenue grew 5% year-over-year to $63 million on increased hardware sales in North America. We expect numerous opportunities in this line of business, and it will be a critical component of our future growth as our enhanced software modules continue to drive meaningful hardware upgrades. Table products grew 9% compared to the prior year to $51 million on higher utility sales as we continue to develop and grow our pipeline of innovative products. Overall, I am pleased with the continued execution of our strategy, supported by the broad portfolio of games and products we have at our disposal. Turning to SciPlay. Revenue for the quarter was $202 million on a record performance by Quick Hit Slots and 88 Fortunes, games that grew 16% and 31%, respectively, within our expansive portfolio as we continue to outperform the broader social casino market. AEBITDA grew 3% compared to the prior year period of $64 million, representing a margin of 32% or a 200 basis point increase. Underlying this expansion is our direct-to-consumer platform, which generated $27 million over 13% of revenue in the quarter. This 750 basis point increase across the past 12 months is a testament to our commitment to scale this offering sustainably and prudently over time. Importantly, we remain true to our principles on user acquisition spend, deploying in a responsible manner to enhance our acquisition, engagement and monetization flywheel opportunistically. We will continue to invest in UA spend as needed and reassess if we are not seeing the returns above our thresholds with current industry dynamics. Monetization continues to be a key focus and remains strong during the quarter as various key metrics grew meaningfully compared to the prior year. Average revenue per daily active user increased 5% to $1.06, and average monthly revenue per paying user was up 3% and approaching $117. Through this activity, payer conversion increased by roughly 20 basis points to 10.4%. The underlying foundation of the KPIs and performance in our broader portfolio reflects a business that can grow sustainably as we have stabilized Jackpot Party and see a return to growth moving forward. I'm confident in the strategy and execution of our SciPlay team as we successfully navigated complex industry changes in the past, which has driven outperformance relative to the market year after year. We will continue to leverage our best-in-class SciPlay engine across an array of games with a focus on sustainable growth. On to iGaming. Revenue increased 4% year-over-year to $77 million, largely driven by continued market expansion and content launches. AEBITDA grew 8% compared to the prior year to a record $27 million on higher revenue flow-through and AEBITDA benefit from the discontinuation of the live casino business in the quarter. Our focus on investment reallocation and first-party content is expected to sustain this margin uplift over time. Importantly, we achieved another record quarter of GGR on our OGS with $25.2 billion of wages processed through the content aggregation platform, a 13% increase year-over-year. Our studios continue to benefit from the scale of the network with Lightning Box and ELK GGR up 15% and 9%, respectively, driven by strong franchise performance from Thundering, EggLink and Pirots. Our first-party content deployment strategy is further enhanced with key game launches in the quarter such as Thundering Tiger from Lightning Box and Cygnus 5 from ELK. With our resources now realigned, aimed at building high-margin, first-party content, we expect to drive significant value underpinned by continued market growth and long-term expansion opportunities for years to come. As evidenced through my commentary on the business units, we continue to demonstrate a commitment to optimizing operations across the enterprise, ensuring every dollar spent impacts the bottom line. This includes managing corporate costs while executing top line growth initiatives. Over the past year, margins have consistently improved, reaching a consolidated AEBITDA margin of 40% in the quarter. While some of this is attributed to positive changes in the mix shift of our business, we have also been executing an in-depth analysis of our business and relevant costs over the past couple of years. This includes ongoing business reviews around margin enhancement as well as the rightshoring of resources and optimizing supply chain to ensure the most efficient and effective processes are in place. We expect to see these adjustments continuing over the coming years, which will ultimately set us up well for the long run. On the topic of our supply chain and the uncertainty of where tariffs will land, it is important to note that we are a global company that operates in numerous product lines and business models, which are impacted to varying degrees by changing policies. For the applicable parts of our business, we are largely in line with the industry in terms of the magnitude of impact. This being said, this is a dynamic environment we are navigating, and the plan that was previously implemented is absolutely crucial to our mitigation efforts. We have been executing on longer-term plans to enhance our supply chain and operational efficiency. This ranges from onshoring of production, relocation of sourcing and utilization of agreements such as the USMCA. As we progress forward, we will remain nimble and reactive to the environment and continue consistent reevaluation of our supply chain and operational business. Our margin enhancement initiatives were implemented with the purpose of capital accretion to further enhance our cash conversion and reinvestment. We are well positioned to mitigate risks that could potentially pose disruptions so that the team can continue to execute and sustain our strategy and road map. We will continue to monitor the situation closely as we get further clarity over the coming months. We remain on track to deliver our 2025 consolidated AEBITDA financial target of $1.4 billion and associated adjusted NPATA range despite the tariff headwinds given favorable trends in the business and our broader margin enhancement initiatives. As a reminder, this is excluding the contribution from our proposed Grover transaction. In terms of free cash flow for the quarter, we delivered $111 million, a 19% increase compared to the first quarter of 2024 while we continue to work through initiatives to scale our cash conversion on an annual basis. We see this quarter as a sign of progress, an indication that our business is capable of generating more meaningful free cash flow over the long term. I'm also pleased to share that we have received commitments on a 3-year, $800 million Term Loan A at leveraged based pricing in line with our current revolver for the financing of our pending Grover Charitable Gaming acquisition. The commitments from our lender group far exceeded the $800 million request, a testament to the strength of our relationships with our bank partners and stability of our business. Upon full realization of the benefits of the acquisition, we do not anticipate this incremental debt to move us outside of our targeted net leverage range of 2.5 to 3.5x on a pro forma basis. One of the primary uses of capital during this quarter was our share repurchase program. We completed an additional 17% of our authorized $1 billion program, having purchased 1.9 million shares totaling $166 million. We will continue to monitor the market and execute on share repurchase within the context of our capital allocation blueprint while staying mindful that preserving liquidity is often beneficial in a fluid market. I'd like to close by reflecting on the foundation of excellence established here in Light & Wonder. Scaling our business units and generating incremental shareholder value over the long run can be accomplished by our focus on building sustainable and accretive business operations. We will now open up the call for some questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question on the line comes from Barry Jonas with Truist.

I was hoping you could talk a little bit more about how tariffs are impacting the business, that's both on the cost side, but I'm also interested to hear any thoughts on what you're seeing from customers around the replacement cycle or game ops trends.

Hey, Barry. Dynamic situation, to say the least, changes by the day or the hour or the tweet. I would say at the moment, tariffs are looking mitigatable for -- from where we're standing. I think it's evolving over time. If you go dial back 3 or 4 weeks when the policies first came out, it was a little bit scorched earth in terms of getting product into the U.S. out of many of the Asian supply base. But over time, we found ways to mitigate that through reconfiguring the supply chain and also just with some of the pauses that we've seen on tariffs coming through. So at this point, we see a pathway to mitigate that, recommit to our $1.4 billion target. I've said it many times before, back in 2022, there was no false precision about the way we'd get to the number. Every time we re-forecasted, it's a different configuration of pathways to get there. The team has done that work to re-forecast and we see line of sight to getting there. So I would say from a tariff perspective, it's a burden that the entire industry is going to have to manage through. It starts with what we can control and managing our cost base as effectively as possible. I think secondly, it's about suppliers really stepping up to the plate and shouldering their burden of those increased tariff costs. And then finally, as we saw with COVID, passing through what we can to customers. Largely, we're going to try to mitigate that ourselves and through the supply base. But we saw our ability to pass-through some cost to customers through that COVID experience, so we see this as being no different. But it starts with us and us mitigating our cost as effectively as possible. But, Oliver, anything to add to that?

Yes, just a couple of adds there. I think just -- we spoke about this at the 4Q earnings call. We'll continue to be diligent in implementing the measures that Matt mentioned. And it's really the diversification of the supply chain that we've been working on over the last couple of years. So to Matt's point, this is a moving target, and we've seen that over this past month. This current state is likely what we would kind of consider as worst-case scenario, and we believe it will improve as negotiations takes place with this current administration in the various different countries. But I think importantly, we are taking a very balanced approach to mitigating this. We're not overreacting to kind of the ever-changing policy and uncertainties that we see. So the focus for us will continue to be prioritizing the investments to support the achievement of $1.4 billion and then also supporting future growth.

Your next question comes from Matt Ryan with Barrenjoey.

I had a question on the U.S. gaming ops yield in the first quarter. And maybe if you could just share some color on how we should read that in regards to the impact from macro or sort of coin in versus what you might have seen from mix through the portfolio.

Hey, Matt, kind of a multipart question there. I would say what we had committed to in Q1 was reversing a lot of the discounting we had seen in Q4 as a consequence of the Dragon Train situation. That has happened. That's actually unwound those discounts. So we see that base back to normalization. I think what you're seeing in the number in Q1 was really weather-related and mostly on our WAP product in the Northeast specifically. I think Oliver touched on that on the prerecorded remarks. Consistent with what we've heard from operators, and we've heard from competitors in the marketplace, we also saw some of that in the Grover installed base. So kind of seasonal, weather-related issues that have reversed themselves. And yes, we're back to kind of normal trading at the moment. So I would say what you're seeing in that is really weather-related and a onetime, isolated event.

We now have a question from Chad Beynon with Macquarie.

Wanted to ask about the SciPlay business. There was a recent ruling with Apple related to alternative payment methods, which could play into your DTC strategy. It could be, I believe, a positive. Wondering if you could touch on how this can affect the business going forward when we could expect to see some change and if there's any updated goals in terms of what that DTC percentage could get to for the business.

Yes. We're excited to see that ruling be favorable. It does create a great tailwind from a margin perspective for the social casino industry. We've gone from 0% DTC just a few short quarters ago to over 13%. We've been ramping that up in line with the rules and regulations related to Apple and Google. Yes, this does seem to give us a bit more oxygen in terms of pushing the agenda on direct-to-consumer, so you should expect that from us through the remainder of the year. We're actually going to share some targets around that at the Investor Day in New York in a few days' time. So timely, we got that ruling. It was always going to be a driver of our long-term growth prospects of the AEBITDA line. But I think this ruling gives us the opportunity to be a little bit more aggressive on the accelerator as it relates to direct-to-consumer. So we see that as a really nice tailwind from a margin perspective for the social casino business.

We have another question from Andre Fromyhr with UBS.

I just wanted to ask about the international gaming business. We can see, at least from a volume perspective, the installed base has declined a little bit sequentially. It's down 10% year-on-year, and the overall volume of unit sales has also slowed down in the last couple of quarters. Can you talk through what's going on in your international markets and what the prospects for the rest of the year look like?

Yes. Let me start there on the sales volumes and then maybe you just chime in on the game ops volume. I'd say there is some seasonality in Q1, 25% relative to the prior corresponding period. We had a large transaction that happened in the Asian market in Q1 of '24. So we're cycling over that which gives us a bit of a tough comp in Q1 from an international perspective. We're also cycling over extremely elevated share numbers in Australia. We're proud to say we were still #1 in the Australian market in Q1 from a share perspective, but not at those kind of all-time highs. So a couple of tougher comps there for us to cycle over. We still see it as being a really strong contributor to our overall business momentum. We're seeing our product portfolio line up really nicely to the Australian market. You can see that with all the releases we've had. Actually, Huff N' Even More Puff, our #1 game in the U.S. went to #1 in Queensland Club in Australia, which just speaks to the depth and breadth of our portfolio. And also, the feasibility of taking U.S.-style products in the Australian market, which hasn't always been the case, but we still see strong momentum in that part of our portfolio go forward. Do you want to just touch on game ops?

Yes. This one is a pretty straightforward one. From an international installed base perspective, there were some conversion to sales for leased units that primarily happened in the Lat Am markets. This is just a commercial model that happens from time to time. This is not, I would say, a regular kind of occurrence but will happen from time to time. So this was, I would call, a onetime event here at the moment, and we'll continue to kind of evaluate those opportunities as we move forward.

We now have David Katz with Jefferies.

You covered a lot of ground, but I noticed one issue I don't think you mentioned is the conversation that started a quarter ago around your listing. I wonder if you have any updated thoughts about that or any timing and any sort of perspectives on how you're thinking about that, given that since we last talked in a public call, quite a bit has happened.

It certainly has, David. It certainly has. Yes, last time we updated the investor base, I think it was in the Q4 call, we talked about exploring the avenues to accelerate the Australian listing. Our commitment was we'd go and engage with all stakeholders. So we've done that now, we've spoken with major shareholders to get their perspective, potential shareholders to get their perspective. I would say largely supportive of the idea of pushing the envelope with the Australian listing, which it's happening organically. We just printed our CDIs in Australia at 38.5% of our market cap. So yes, to go from 0% approaching 40% so quickly, just speaks to the efficacy of this idea and pushing the agenda. I would say given everything else that's happening in the world, we know there's a lot on investors' minds, whether it's the macro or tariffs or any number of things. And so yes, in times of uncertainty, it's probably worth kind of taking the foot off the accelerator with this initiative for a period of time. We're still interested in continuing to push the agenda with the dual listing. Like I said, that's happening organically. But yes, for the moment, don't expect a big announcement from us and a change in direction in terms of our strategy, just given all the uncertainty in the broader market. We still feel like it's the right thing to do, the right initiative, but we're going to be thoughtful at the pace at which we execute.

We now have a question from Rohan Gallagher with Jarden.

Matt, Oliver, a lot's changed since you put out your $1.4 billion AEBITDA guidance 3 years ago. It's including litigation, includes the economy, includes the tariffs, et cetera. Obviously, yes, the reiteration of that guidance highlights the sort of resilience that you've built in the business. You've obviously got a lead further into particular aspects to achieve that result given the recent adversities. Can you just articulate in terms of what do you need to ensure that you get to that $1.4 billion in terms of where you see gaming ops needing to get to, where do you see DTC needing to get to, cost optimization, margin expansion, et cetera? That would be super helpful.

Yes. Thanks, Rohan. And I'll just kind of restate that there's no false precision in the pathways to get there. Go back to in 2022, the last Investor Day, we thought casual would play a big part of the growth expansion. Yes, we didn't think international would be as big a part of the gaming story. There's this and multiple different things that have happened over the years that have changed the pathways. And like I said earlier, our obligation is just to continue to re-forecast what's the opportunity set in front of us, and we do that on a very regular basis. So we've done that just very recently. However, I might give you some of the building blocks, but to answer your question directly, I'd say from a game ops perspective, it's continuing this momentum of adding games in the range that we've been adding for the last few quarters. You've seen that kind of ebb and flow between 500 this print, 850 last print. I think it was at maybe more like 1,200, the one before that. So I'd say a continuation of the product momentum translating into gaming ops growth. I think continuing to see that yield tick up from where it is here, given that we'll unwind some of that weather activity. Many of the businesses that are underlying kind of momentum-style businesses. So think about social casino, SciPlay as an example. We see Jackpot Party reaccelerating into the second half to give us some tailwinds for SciPlay. I think iGaming seeing a bigger market in the U.S. than we had probably anticipated. GGR just remain very elevated. And we're seeing some strong momentum in our 1PP content with things like Huff N' Puff coming to market. So yes, a number of different pathways to get there. I can't guide you on all the metrics, but we do see line of sight. We've done that re-forecasting. We see a solid pathway to get there. But, Oliver, anything to add?

Yes. I just think to add on the top line, we do see solid momentum in the underlying business, to Matt's point, so we do have line of sight to top-line growth to get us to the $1.4 billion. I think you also saw this quarter, we grew 300 basis points year-over-year from a margin perspective to 40%. So we've been executing on this margin enhancement kind of strategy for the last couple of years. And our focus will be just to do that quarter in and kind of quarter out. We know that -- we believe we can see sustained margins at the business unit line item, just even with some of the ebb and flows of the potential kind of market volatility that you see. And so I think for us, control what we can control. I think cash flow is a strong result for us. We're going to continue to drive improved cash flow over time. And to be clear, we're not going to cut our way to prosperity here. We're going to ensure that we remain nimble, obviously, with this administration kind of weaving and bobbing here. But our goal is to continue to invest to support the $1.4 billion, but more importantly, how do we invest for future growth aspirations, then we'll talk to you in a couple of weeks.

Yes. And maybe just one build on that to address the first part of your question. Look, obviously, there is a lot of concern about the macroeconomic environment. I watch the same news that you do, it's all-consuming. But I would say, it's a reminder that the economy is not the gaming sector, and the gaming sector is not Light & Wonder. I think we've got to look at the specific situational drivers for our business. I think the one number for everyone to kind of stay focused on is GGR. Like GGR is the fuel that drives the engine of the gaming ecosystem. And if you look at those numbers, they're holding up really well in markets across the U.S. So that's the number to look for as a potential catalyst either to the upside or the downside. We're watching it like hawks ourselves. I think operators are doing the same. Again, we're lucky that we go after many of our casino operator partners that publicly trade. They're saying constructive things about the consumer at this point in time, but it's something we watch very closely.

We now have Jeff Stantial with Stifel on the line.

I wanted to just follow up and dig a bit deeper on Barry's question from earlier. Matt or Oliver, whoever wants to take this, can you just help us think a bit more about how we should think about timing for the current tariff policies to start to impact your input cost? I assume pricing is fixed at this point through the contracted pipeline. But just how should we think about input cost variability and the timing for the tariffs to be influenced through COGS and CapEx, maybe net of some of the mitigation efforts that you talked to earlier in the call?

Yes. Obviously, when this news landed, we activated the team very quickly to figure out what can we do to mitigate this as effectively as possible. So pulling forward inventory was a key part of that to make sure we get multiple quarters of inventory that's tariff unaffected. So we're in a solid position as it relates to that. We'll hit kind of the cash flows, obviously, because pulling forward inventory will do that. But we have a number of quarters here where we'll have unaffected inventory from a tariff perspective. And that is really about the mitigation efforts. And so dynamically reconfiguring the supply chain to circumvent the policies that are in place, bringing product through Mexico is one great example of that. I would say, as an industry, the big 3 suppliers, we know pretty intimately. From a supply chain perspective, we're all very similar in the way we configured this. Not a huge amount of suppliers that supply the types of things that we need to build slot machines, so yes, you do see a pretty homogenized supply chain when it comes to the pathways to bring product into the U.S. So I would say multiple quarters where we don't have affected inventory. And then like I said in the opening remarks, go back 4 weeks ago, and it was a pretty scorched-earth environment. You get tariffs in play, then you get reciprocal tariffs, and it felt like things were always moving against us. But I would say for the last 3 to 4 weeks, sanity seems to have prevailed, and things have really calmed down. And for us to make strategic decisions about how to reconfigure our supply chain to optimize it, we need to understand consistently what is the lay of the land. And I think we're getting better insight into what is the forward-looking situation going to be like. So I think that's pretty comprehensive. But anything you want to add to that?

Yes. I mean I think that this is work that we've been doing for the last couple of years, and I probably mentioned this either in this call, on the last call, but Anthony Firmani and that team have been focused on diversifying the supply chain. To Matt's point, we're looking at rightshoring operations, whether that's to Mexico and other areas to kind of utilize the USMCA or just any other trade agreements that are out there that could redivert kind of tariff-related impacts. And so I think for us, and I said this earlier, we're not going to be knee-jerking this, right? We want to make sure that we're not overacting, that we understand kind of where this all settles and ultimately, we'll come back to you all if there's an appropriate update to be provided to the broader market.

The next question comes from Rohan Sundram with MST.

Just the one from me. And I know you've talked extensively about tariff impacts, and thanks for the color. I just wanted to just -- and apologies if I missed this on the call earlier, but how do you see tariff impacts impacting not just -- you talked about COGS, but in terms of customer decision-making? And have you seen them pause? Or is there any reconsideration temporarily on their behalf? Or do you feel like the casino results were so robust, is it very much a business as usual, but a bit more cautious type environment?

Yes. It kind of changes by a range of different factors. So you do have some customers pulling forward orders. You've got some that are pausing to see what the situation looks like. So I don't think there's a one-size-fits-all scenario. I would point to the Eilers survey that just came out with forward-looking intentions, looking to tick down a little bit from a replacement perspective. But what I would say about that, and the survey calls it out, is that was filled out 4 weeks ago, right in the middle of the storm, where things were very, very uncertain. I think if you repulsed the customer base, again, given what we know now, you might see a different result there. But yes, I'd say customers are like snowflakes. They're all slightly different with slightly different drivers. You have publicly traded organizations that have a lot of scrutiny around their CapEx. You've got tribal budgets, which are a bit more set and forget for the year. So there's just a range of different customers out there, I don't think they're all acting in unison. They're all kind of managing through this slightly differently. So to the extent that GGR holds up and the casino economy, which has proven to be resilient through the cycles over the last few decades, then I think that purchasing power will stay intact. Obviously, the market's a function of price and quantity. So if pricing has to go up as a consequence of tariff, quantity is the offset there. I don't think the operators have infinite budgets. So like I said earlier, our obligation is to mitigate all the costs as best we can. Leverage our supplier partners to shoulder their part of the burden and try not to pass cost on, as much as we possibly can, to customers. So we keep the quantities where they -- where we want them to be.

Yes. And I think my only add to that is, obviously, if there are some puts and takes, broadly speaking, we always say this, right, content -- the best content always wins at the end of the day. And if you look at even the most recent Eilers charts, Light & Wonder is still peppered all across both the for-sale market as well as the premium recurring revenue list. So I think for us, it positions us really well to be able to be dynamic and nimble whatever this market kind of comes to bear.

We have a question from Adrian Lemme with Citigroup.

I just wanted to note, the revenue growth in the last 2 quarters seems to have really slowed. And I know you've talked about some impacts with weather and other stuff in terms of cycling some tough comps. But being -- are you expecting to see that revenue growth really accelerate through the rest of this year to get to that guidance target you said? It just seems like in the first quarter, there was a lot relying on margin expansion. So if you could just talk to that, please.

Yes. I would say Q4 was a little bit light. We were obviously navigating through some situations there in Q4. And then I would say in the first quarter, there's been some tough comps on the gaming side, which will kind of unwind throughout the remainder of the year. The one to talk to directly, and we mentioned this on the fourth quarter, was in SciPlay, Jackpot Party had a few issues in the -- very late in the second half of the year in '24, which kind of bled over into the first part of 2025. It was really an economy issue. These games, particularly the way that SciPlay runs them, which is really why they've been successful, are kind of multifaceted from a Live Ops perspective. And so when you're layering on multiple different bits of Live Ops functionality, you have the potential for the economy not to act the way it should. We -- Josh, not we. Josh actually rewrote the economy for Jackpot Party in the first quarter. I mentioned this on the Q4 earnings call that we had done that, and it started to trend positively. I would say since then, we're seeing the game really react the way it should and the way it has over the years, and so we see that rebounding throughout the remainder of the year. I would say Jackpot Party had really strong Q1 and Q2 of '24. So it's having to cycle over a tough comp from a revenue perspective to get back to where it was. But we see the second half, given the trajectory of the game is now on given the rerun of the economy, that will be a big tailwind for SciPlay. And it's our biggest game, so having that back in growth mode will be a key contributor to that market. But that's what I'd say about the revenue drivers. I think from a gaming perspective, there's a bit of a second half weighting to some of the game sales opportunities. Particularly in Asia, we have a big ETG opportunity in the second half that were locked in on. So anything you'd add to that, Oliver?

Yes. I said this earlier, I think the underlying parts of our business remain strong. I look at the recurring revenue piece of it. So we did grow 5% top line from a -- from gaming us per se. We added 500 units to our installed base. You're seeing the premium mix continue to kind of shift up. We had contributions from systems and tables and other parts of our businesses to help kind of bolster kind of sales. And I think the other piece that kind of gets kind of unnoticed here is that we shipped over 5,700 units in North America from a for-sale perspective. So that's strong growth year-over-year. We have momentum in North America. We have strong execution from Brian Pierce and the teams there. And so, like I said, we're confident in the execution of kind of returning back to normalized growth here as we move through this year.

We now have Justin Barratt with CLSA.

And so just following up on that last question then. I guess as we sort of think about more broadly the remainder of calendar year '25, should we expect more broadly, I guess, even contributions from revenue growth and, I guess, margin expansion as you push towards that $1.4 billion target?

Yes, I'm not going to give specific guidance when it comes to the revenue contribution and AEBITDA. I would say you should expect a tick up in terms of the revenue growth throughout the remainder of the year for the reasons that I just mentioned. I'll also just take an opportunity to mention this because no one's asked yet, but in a matter of weeks, we'll -- we will execute on the Grover transaction. And while we said that's not part of our $1.4 billion guide, it's a nice, fast-growing, recurring revenue business that will start to make a meaningful contribution to Light & Wonder over the remainder of the year. The business is performing at all-time records. Performing better today than when we signed the contract to acquire the Grover Gaming assets. Indiana just got approved, which was not in any of our base case assumptions. We -- given what we've experienced with iGaming and the kind of the slowness of regulations and markets opening up, we -- we've learned not to put those things into our base case. And so Indiana coming on, which is a very sizable market, just another tailwind for revenue. So I think to the extent that you follow the company, you need to start to think about how does Grover factor into forward-looking forecast because it's going to be a nice growth piece of recurring revenue for us.

We have the final question on the line from Paul Mason with Evans and Partners.

I just wanted to get some comments on the 3-platform strategy and Carbon platform and sort of where that's at. I know you're going to do more at the Investor Day, but just in light of lots of questions around sort of costs and things like that. Like where are you guys at on sort of the efficiency that's meant to be coming from that around being able to deliver games across platforms simultaneously? And have you sort of already got a lot of the cost efficiencies from Carbon and like simultaneous release? Or is that sort of something that's still coming?

It's a -- I'm not here to sell Victor Blanco's thunder from the Investor Day in a matter of days. He's going to give you a very detailed explanation of where we stand relating to Carbon. Grover has accelerated our Carbon investment. That gave us a really good use case for us to build games on a new platform for that market given that Grover has its own stand-alone platform. So Carbon will sit across Grover. And then it will give us that kind of Trojan horse to take that platform then across all the other 3 verticals. So I would say we're building it now. The only area that it shows up in -- our P&L is in the cost line, so we haven't really gotten to any of the synergies yet. Grover will be, really, the first game to go out, built specifically on the Carbon platform, but gave us a really good reason to accelerate that program of work, which is important for our future. The 3 businesses we have today are on -- all on slightly different operating models and platforms. So having the Trojan horse in Grover to build this bespoke platform that we can take to the other businesses is just -- it was just another great reason why Grover -- the Grover acquisition just made a huge amount of sense for us across the financial contribution, the culture and values alignment, but also this kind of tech initiative gave the reason to accelerate that. So again that's all in front of us from an efficiency perspective.

I can confirm that does conclude the Q&A session. I would like to hand it back to Matt for some final, closing comments.

In closing, I'd like to again thank everyone for joining our call today. We look forward to seeing many of you at the Investor Day in New York. For those who cannot attend, we'll be live streaming the event and recording it for replay purposes. Have a great week and thanks for joining us.

Thank you all for dialing in for the Light & Wonder First Quarter 2025 Earnings Conference Call.