Light & Wonder Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 27, 2024

There are 14 speakers on the call.

Operator

Hello all, and welcome to the Light and Wonder 2023 4th Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

Operator

I'll now turn the call over to Nick Zangari, Senior Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Welcome to the Q4 and full year 2023 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 Q4 and full year 2023 results and operating performance, followed by a question and answer session. Today's call will contain certain forward looking statements that may involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call.

Speaker 1

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 reconciliation of each non GAAP measure to the most directly comparable GAAP measure can be found in our earnings release as well as in the Investors section of our website. In 2022, we completed the sale of the lottery business to Brookfield Business Partners in the 2nd quarter and the sale of the sports betting business to Endeavor in the 3rd quarter. Accordingly, we have reflected these businesses as discontinued operations in our consolidated statements of operations for comparable prior periods.

Speaker 1

We are reporting our results of continuing operations in 3 business segments: gaming, sciPlay and iGaming. Amounts and disclosures referring to combined include both our continuing and discontinued operations. As a reminder, this conference call is being recorded. A replay of this webcast and accompanying material will be archived in the Investors section of our website. With that, I will now turn the call over to Matt.

Speaker 2

Thank you, Nick, and thanks, everyone, for joining today's call. Our Q4 performance capped off a banner year for Light and Wonder as we continue to build upon our strong business and financial foundation. Notably, we have consistently delivered on our key performance objectives since we announced the company's transformation strategy. Our numbers reflect strong execution and continued momentum with consolidated revenue up 13% over the Q4 of last year, marking 11 consecutive quarters of year over year growth. We once again delivered double digit growth across the board as evidenced by our results throughout the year and have now achieved 5 consecutive quarters of double digit revenue growth in all three businesses.

Speaker 2

As a result, we ended the year with a 16% increase in consolidated revenue, reaching a record $2,900,000,000 for 2023. Looking back, I would like to share with you what defined Light and Wonder and drove our success this past year. We have an exceptional team and experienced leadership with a winning mentality. I firmly believe that we have the best in class talent executing on a proven playbook and I commend our entire team for an outstanding quarter and an outstanding year. Throughout 2023, we made strategic investments in the aspects of our business that we expect to drive long term sustainable value, something we were not able to do before the transformation.

Speaker 2

Our improved financial position and disciplined capital allocation strategy support our ability to continue to invest in the future of Light and Wonder with a commitment to accelerating R and D investments and enhancing our product offering. We have a differentiated product strategy and demonstrated sound execution on our growth pillars with refreshed hardware and content for both core and adjacent markets. We achieved impressive share gains in key markets with the popular franchise Dragon Train continuing to drive our growth in Australia and creating notable operator engagement around our pending release in North America. We also made considerable progress in adjacencies and we expect to be active in video lottery terminal markets, notably Oregon and Quebec where we've recently announced deals, as well as the coin operated amusement machine market and historical horse racing markets in 2024. Capitalizing on franchise extension has been another key differentiator in driving our success.

Speaker 2

We have shifted our focus from allocating the majority of our resources, the new niche markets coming online and now building on our evergreen franchises and game extensions, which can be leveraged across our entire ecosystem. In our digital businesses, SciPlay had another record quarter with continued market share momentum and higher revenue in the social casino space, which we will discuss in further detail. Our iGaming business segment continued to be a growth driver for Light and Wonder with a strong quarter reflecting continued momentum in both the U. S. And international markets.

Speaker 2

These results demonstrate the benefit of our robust R and D strategy, driving improved cash performance with impressive returns on our investments. We continue to see iGaming as compelling opportunity as this market continues to develop over the coming years. For Light and Wonder, it truly is all about the game. Throughout the past year, we executed on our product strategy to build exciting industry leading games that have continued to drive our impressive performance metrics. In addition, we are pleased with our continued progress on our cross platform strategy with development efficiencies being realized and content expansion across all channels driving digital revenue uplift.

Speaker 2

We are very pleased with our considerable progress across our business units as we continue to capitalize on the opportunities in a resilient gaming industry. I will now turn to our business unit operational highlights. Gaming continues to be a strong driver for Light and Wonder. Our investments are bearing fruit as we deliver on strong top line growth, up 13% for the quarter 16% for the full year. We saw continued momentum in gaming operations, ending the year with an increase of 5 90 units or 2% growth in our North American in store base year over year.

Speaker 2

These results were largely driven by premium units, which continued to increase for 14 consecutive quarters. The performance of our games is on full display with both North America and international revenue per day exceeding 2022 levels in the quarter and for the year. This is a testament to our strategy, focusing on fleet optimization and ensuring the games we develop are casino floor mainstay, maximizing the full value of each and every unit we deploy onto the casino floors. We will continue to build on our evergreen franchise extensions such as Ultimate Firelink, Puff and Puff, Dancing Drum and recently Dragon Train, which was the biggest Australian launch in the company's history. Our licensed titles such as top performing monsters and highly anticipated Squid Game featured on a highly successful cosmic and new large screen jumbo Horizon cabinets are expected to extend our momentum heading into 2024, providing immersive and seamless player experiences.

Speaker 2

In game sales, our strategy was validated by an outstanding performance with over 37,000 units shipped globally for the year, a company record and an increase of 40% compared to the prior year. Our progress in both North America and Australia is evident as we continue to maintain over 20% market share in both markets with exceptional growth in the replacement segment year over year. We expect continued growth with our Cascada series cabinet, notably the Cascada Jewel Screen, which was named top performing new premium cabinet at Islay and the driver of our announced deal into Oregon and more recently Lotto Quebec. Moving on to systems. Highlights for 2023 included key contract wins driven by our product portfolio with enhanced capabilities such as loyalty features, giving operators access to greater insight on player preferences.

Speaker 2

Our recent systems deal announcement with Harry Reid International Airport, and Mohican Inspire Entertainment Resort in Korea fully demonstrates why we are the preferred choice for operators, providing an intuitive, curated customer journey at every touch point regardless of location, vertical or platform. Our Engage product continues to gain traction as we focus on software services in addition to our in demand hardware. We're excited by the offerings that we highlighted at the Global Gaming Expo such as Cashless, which is currently gaining traction including in Australia as we participate in trials in New South Wales for responsible gaming initiatives. We expect Light and Wonder to maintain its leadership position in this space through innovation and partnership with our operator customers to bring the most comprehensive portfolios to the market. On to tables, we continue to be an industry leader known for best in class products and an extensive library of IP.

Speaker 2

The recovery in the global markets helped drive higher sales with table product revenue up 13%. Overall, we expect to expand on our recurring revenue stream and target long term growth through product innovation and hardware investment, where we have a proven track record of success. To sum it up, I'm very pleased with our performance in gaming. Light and Wonder is still in the early innings of growth in this sector. Importantly, we are well positioned in every product category with our premium offerings and a focused strategy to capitalize on new opportunities across this important segment.

Speaker 2

Now turning to SiPlay. We continue to be pleased with our performance in the social casino space. SiPlay is now a fully integrated part of our portfolio, executing beyond expectations in a breakout year. 1st, I'd like to share that the integration has gone well and we are executing on our cross platform strategy through a more harmonized development process across all businesses. Last year, I highlighted our key growth objectives for Cyclone, outpacing the social casino market, scaling average revenue per daily active user and investing in both our SiPlay engine and product roadmap.

Speaker 2

I'm very pleased that we have delivered on these objectives, reflecting both strong leadership and consistent execution. We outpaced the market again now for 8 consecutive quarters and have consistently gained share over the course of the year. Biplay grew revenue 12% in the quarter and 16% for the year, both record levels. Our 4 largest games, Jackpot Party, Quick Hits Slots, Goldfish Casino and ADH Fortunes posted quarterly record revenues, a testament to the success of our SciPlay engine as we continue to enhance our portfolio of games through our LiveOps strategy. Our recent Dancing Drums app launch was also a success as we continue to expand our land based titles on our social platform.

Speaker 2

Average monthly revenue per paying user was approximately $114 and average revenue per daily active user increased 15% year over year to $1 both record levels in the quarter. We will continue to invest in our capabilities and product road map to drive engagement and loyalty, while continuing to grow monetization sustainably and responsibly, particularly in our core franchises. Entering the New Year, we are focused on developing our direct to consumer platform, which we expect will enhance player relationships and engagement, accelerate the potential to expand margins over the long term and grow lifetime player value. Clearly, SciPlay continues to be a valuable growth driver for Light and Wonder and a big part of our overall strategy. Going forward, we look to extend our industry leading social casino growth as we further differentiate our offering from those of our peers.

Speaker 2

Now looking at iGain. Our portfolio expansion enables us to be one of the largest content providers in the industry, and we continue to see tremendous demand from operators and from players. Quarterly revenue increased 13% year over year to a record $70,000,000 with full year revenue also a record, reflecting the continued growth momentum in the U. S. And international markets.

Speaker 2

The growth is a testament to our best in class content aggregation platform and unmatched first party content. The quarter was highlighted by record launches with Pyrox 2 and Ultimate File and Cashballs China Street, further demonstrating our content development roadmap and our cross platform approach. Of the top 20 games on the OGS across the U. S, our 3rd party content accounts for over 2 thirds of the total, driven by land based titles, cable games and Lightning Box. In addition, Elk, Lightning Box and PlayZito all continue to scale with record GGR in the quarter.

Speaker 2

We are collaborating closely with operators on our live casino offering, which went live in the quarter in Michigan with Rush Street, Golden Nugget and DraftKings. The initial feedback has been very positive with teams working together on both sides as we continue to enhance our product with additional functionality. Importantly, other operators have taken note of our collaborative partnerships. And I'm pleased to announce we signed an agreement with Penn Entertainment for Michigan, which will include network and bespoke tables. While we are still in early stages, we are already in discussions with customers on expansion opportunities into other regions.

Speaker 2

Over the long term, we expect this to be a growth driver for our iGaming business. The U. S. Is a fast growing market and we will continue to drive our key initiatives, which are to execute on the launch of 2 epic land based titles plus 1 digital native title monthly, expand jackpot, steppers and table game offerings with our IP and scale and accelerate Elk Studios launches and game services such as marketing jackpots and multiplayer features, all while focusing on game placement and promotion. As we look to 2024, we expect to extend our momentum through our regionalized road map and original content that have already brought us great success today, as well as further expansion into new markets.

Speaker 2

We are encouraged by the legislative progress in Brazil, confirming our optimism for the future of iGaming legislation as a growth driver for Light and Wander. Our portfolio expansion and legalization will drive future growth and our impressive scale, robust product offering and well established footprint globally positions us well to execute when opportunities arise. We are very proud of our accomplishments in 2023 as we executed on a number of key strategic initiatives. Our successful secondary listing on the Australian Securities Exchange or ASX further expanded our global presence in May. Subsequently, we were added to the ASX 200 Index last October.

Speaker 2

This inclusion enables Light and Wonder's exposure to a broader base of investors, further solidifying our position in the Australian capital markets. Notably, feedback to date from the Australian investor community continues to exceed our expectation. As we previously mentioned, we closed the Saipla acquisition in October as well with integration completed successfully and collaboration on our cross platform opportunity accelerating. Finally, we continue to strategically increase our investment in the business and return capital to shareholders, all while improving our cash conversion and further reducing leverage. I'm also pleased to report that Light and Wonder's strong performance did not go unnoticed as we garnered several distinguished industry awards this past year.

Speaker 2

As a testament to the success of our cross platform strategy, we were named as the Multi Channel Supplier of the Year at the International Gaming Awards. We were also named Full Service Platform Provider of the Year at the EGR North American Awards, fully demonstrating the power of our well wrapped portfolio. Our business unit leadership and teams all received accolades at the SBC Awards in North America. Notably, SciPlay was named Social Casino Operator of the Year on the back of the banner year. Our momentum internationally was also recognized as we were named Casino Supplier of the Year at the Global Gaming Awards in Asia and most recently at ICE in London as well.

Speaker 2

Additionally, we were acknowledged for our CSR and ESG efforts by being named a diverse and inclusive team at the Women in Gaming Diversity Awards. As part of our recent transformation, we have also strengthened our commitment to be a positive influence on the industry, driving key social initiatives that are core to our values. Our primary focus on responsible gaming as an industry leader drives us to create products and services that can be enjoyed responsibly across the globe as evidenced with our cashless collaboration with peers and regulatory organizations in Australia. Responsibility starts with us and we will continue to educate our employees on awareness of responsible gaming policies and practices. Our corporate and social responsibility programs as well as our environmental, social and governance efforts will continue to be a top priority for Light and Wonder.

Speaker 2

To sum it up, we expect continued execution of our strategy in 2024. The results we delivered in 2023 along with our ability to attract best in class talent, established market positions and strong cross platform capabilities put us on a clear path to achieve our long range targets. Our teams have done a tremendous job and Light Wonder is shining brighter than ever. We are ready to deliver on the promise of sustainable growth as we continue to be the leading cross platform global games company. As you know, in December of last year, Oliver Chow was officially named the company's Executive Vice President and CFO.

Speaker 2

I'm delighted to officially welcome Oliver to our senior leadership team. He has already played a pivotal role in driving the success of the transformation and I'm confident that we will benefit from his expertise and financial guidance as we continue to execute on our strategy. And with that, I'll turn it over to Oliver.

Speaker 3

Thanks, Matt. These are exciting times for the industry and the company, and I'm honored to be part of it as CFO of Light and Wonder. It is my mission to build on our solid financial foundation, leveraging our highly cash generative business with a continued focus on operational excellence. I appreciate the confidence that our global investor base has placed in us, and I take my role as a steward of investor capital very seriously. That said, I look forward to working with all of you moving forward.

Speaker 3

Turning to our operating performance. We were able to capitalize on many of the opportunities presented to us in 2023 and delivered strong top and bottom line growth, both in the quarter and for the full year. For the 4th quarter, consolidated revenue increased 13% year over year to $770,000,000 Full year consolidated revenue was up 16% to $2,900,000,000 a new record for Light and Wonder. Our results were again driven by double digit growth across all of our businesses. Operating income was $155,000,000 in the quarter, an increase of 57% over the prior year period, primarily on strong top line growth, lower D and A and restructuring and other costs.

Speaker 3

Full year operating income was $518,000,000 a 90% increase compared to the prior year. Consolidated AEBITDA grew 14% to $302,000,000 in the 4th quarter compared to the prior year period, primarily driven by double digit top line growth and maintained strong margins across all of our businesses. We grew 2023 consolidated AEBITDA 22% to over $1,100,000,000 a tremendous outcome reflecting the hard work of our talented team and the continued upward trajectory of our financial performance. Consolidated AEBITDA margin was 39% for the quarter the year. We saw a 300 basis point increase over 2022 margin levels for the year, with all three business units over 200 basis points higher, executing with a continued focus on operational efficiencies.

Speaker 3

Adjusted NPAT A was $109,000,000 for the quarter and $388,000,000 for the year. As a reminder, this metric is not comparable to the prior year period due to the materially different debt and tax profile of the company prior to the completion of the divestitures. Consolidated operating cash flow was $167,000,000 in the quarter. Comparability is not meaningful as the prior year period included $176,000,000 of cash tax payments related to the divestitures. Full year consolidated operating cash flow was $590,000,000 up compared to prior year primarily due to cash taxes paid related to the divestitures, which were $32,000,000 in the current year and $641,000,000 in the prior year as well as lower interest payments.

Speaker 3

Turning to the business units. In gaming, we continue to execute against our KPIs, delivering exceptional financial performance supported by our strong product portfolio and proven market strategy. Revenue in the quarter grew 13% year over year to $496,000,000 and EBITDA increased to $245,000,000 a 14% increase compared to the prior year period. This impressive revenue growth was led by robust North American and international game sales in the quarter, which increased 31% year over year with profitability primarily driven by revenue growth in the period. Full year revenue grew by 16% to $1,850,000,000 and AEBITDA by 20 percent to $918,000,000 with solid growth across all business units.

Speaker 3

AEBITDA margin was 49% in the quarter and 50% for the year as we trend in line against historical levels, which we expect to sustain given continued execution on our margin enhancement initiatives over the long run. Gaming operations revenue in the quarter increased 7% year over year, primarily driven by growth in our North American installed base and revenue per day. Our premium North American installed base grew 7% year over year. Revenue per day in the quarter grew 6% in North America and 16% in international compared to the prior year, driven by the performance of our premium games and as we continue to optimize our fleet. Global game sales were robust in the quarter, with revenues up 19% sequentially and 31% year over year.

Speaker 3

In addition to the continued momentum in the North American replacement market, we also had a large replacement sale of over 3,700 units into the UK, which affected average selling price in the quarter. We expect this ASP dynamic to continue as we enter into the adjacent markets more meaningfully in 2024. On to systems, where we continue to expand on recurring revenue stream and higher service and maintenance revenue in the quarter. To note, there was a sizable hardware sale property in Asia in the prior year, which affected comparability. Lastly, tables revenue was flat compared to the prior year, primarily due to the timing of product sales, which resulted in a stronger Q3 this year.

Speaker 3

Looking ahead over the next several years, we expect to expand on the higher margin and recurring revenue segments of the gaming business over time. While we expect 2024 to be another year of robust sales underpinned by innovation and investment in our product portfolio. Turning to SciFlight. We once again delivered record 4th quarter and full year performance, outpacing the social casino market and gaining market share on solid execution against our ROI metrics. Revenue in the quarter was up 12% year over year to $204,000,000 on higher monetization leveraging game content, dynamic live ops and effective marketing strategies.

Speaker 3

With Quick Hits, Goldfish Casino and 88 Fortunes all delivering significant double digit gains on record revenue. AEBITDA increased 17% to $69,000,000 year over year with AEBITDA margins up 200 basis points to 34%. Full year revenue was $777,000,000 up 16% and A EBITDA was $243,000,000 up 30%, both were the highest in SiPlay history. Sideplay's investment in talent and core capabilities has driven significant uplift across key monetization metrics. We saw record average revenue per daily active user increase 15% to 1 dollars and record average monthly revenue per paying user increased 15% to over $113 compared to the prior year quarter.

Speaker 3

Our daily active users and monthly paying users both remain steady and payer conversion rate continues to reach quarterly new heights at 10.7%. Prudent and diligent marketing and UA spend is reflective of SciPlay and more broadly Light and Wonder's DNA. Every decision is carefully considered prior to execution. The margin expansion we saw over the past several quarters is a great example the health of the SiPlay business. Based on our marketing return analysis, we have identified a number of UA investment opportunities throughout 2024, notably in the first half such as the new Joel McHale campaign we launched in the current quarter along with expansion and innovation costs as we look to grow in nascent markets and develop new games.

Speaker 3

Our margins will fluctuate in the near term with these investments, all of which is expected to fuel long term sustainable growth. We applaud the success iPlay achieved this year and the incredible level of execution we're seeing across the portfolio. This gives us confidence in further development of greenfield opportunities, value enhancing initiatives such as our direct to consumer platform and the performance of our core social casino business. On to iGaming, where our performance reflected growth momentum in the U. S.

Speaker 3

And international markets, as well as continued strength in our land based original content launches and scaling 3rd party aggregation on our platform. Revenue in the quarter increased 13% year over year to $70,000,000 and EBITDA grew 21 percent to $23,000,000 Full year revenue increased by 15% to $275,000,000 and AEBITDA was up 19 percent to $95,000,000 As a reminder, we benefited from termination fees in 2023 from certain operators as they pivoted on their digital strategy, which we do not expect to reoccur in 2024. AEBITDA margin improved 200 basis points to 33% in the quarter versus the prior year period, driven by revenue growth. This resulted in an overall A EBITDA margin of 35% for the year, as we continued to benefit from scale while also investing in our portfolio. We saw solid growth year over year in both our North America and international markets with record player numbers on our platform in the quarter.

Speaker 3

Wagers processed through our iGaming platform increased to $21,600,000,000 also a record high. In fact, we saw record quarters in the U. S. And Canada with GGR in each region up 23% year over year and with double digit sequential quarterly growth. The U.

Speaker 3

S. Market was driven by increased volume of land based content along with continued scaling of the OGS partner network. Ontario continues to ramp with increasing volume of first party content. GGR volumes in Europe also reached record highs, marking our 3rd sequential quarter of growth with 11% year over year improvement driven by performance across 1st party, Elk and Lightning Box content. We are well positioned to continue expanding our iGaming business with best in class aggregation platform and a robust product portfolio.

Speaker 3

Going into 2024, we expect growth to be largely in line with overall market expansion, excluding the termination fees we benefit from in 2023. Contributions from Live Casino is expected to be a modest drag on AEBITDA and margins during the year as we continue to ramp up and invest in this business. I am confident in our ability to expand margins as we scale our offerings over time. Over the past year, we've diligently managed our cost base and drove margin expansion. Operational excellence remains a top priority as we further integrate our businesses and identify efficiencies.

Speaker 3

Importantly, with the results and healthy business that we saw this year, we will continue to reinvest back into all three platforms through R and D and CapEx to propel our growth pillars. We will maintain a strategic approach that ensures optimized output with a rigorous assessment of ROI. More importantly, we will continue to invest in our people and technology, the backbone of Light and Wonder that drove our success throughout this transformation and into the execution phase. As our business scales, we also expect associated corporate costs to increase proportionally, providing support for the business units through shared services and other functions. We are building out a lean management team to embed this methodology throughout the organization to drive efficiency and scale.

Speaker 3

We are challenging our teams to act like owners and arming them with tools and training to make a difference across the organization. As a reminder, in Q3, we called out elevated legal costs of approximately $10,000,000 which we expect will have an impact across the 1st and second quarters of 2024. That said, we will continue to stay laser focused on improving processes, being committed to margin expansion and driving sustainable long term profitability through value enhancing initiatives, ensuring we have a prudent sourcing process to drive efficiency as we scale our gaming business and continuous improvement in developing our IT infrastructures. As I step into the CFO role, I'm fortunate to have inherited a business with a healthy balance sheet and a strong financial profile. After the SciPlay deal that we closed in October for approximately $500,000,000 before fees and other expenses, we ended the year with a net debt leverage ratio of 3.1 times, a 0.2 turn improvement over the prior year and within our targeted range of 2.5 times to 3.5 times.

Speaker 3

Recently in January, we were able to further improve our transformed debt profile by repricing our Term Loan B, reducing our interest rate by 35 basis points and driving approximately $8,000,000 in annualized interest cost savings. With the refinance of our 858 senior unsecured notes that we completed in 2023, in total, we expect approximately $14,000,000 in annualized interest expense savings. Our profile is further enhanced by gaining access to the cash on SiPlay's balance sheet and the cash flow generated from the business going forward, providing flexibility and optionality for sustainable growth and value creation as we continue to optimize our cash balances. We reported consolidated free cash flow of $70,000,000 in the quarter. The current year period was affected by $16,000,000 primarily in costs supporting the strategic review and the related activities associated with the SiPlay merger, while prior year was affected by $176,000,000 in cash taxes paid related to the divestitures.

Speaker 3

Full year consolidated free cash flow was $291,000,000 affected by $32,000,000 in cash tax payments related to the divestitures and $25,000,000 primarily in costs supporting the strategic review and related activities. Our 2023 free cash flow conversion rate, excluding the aforementioned items, was 31%, a 1200 basis point increase from the prior year as we stay committed to translating each dollar to the bottom line. Looking ahead, we expect restructuring costs to wind down as transaction related costs roll off. Over the long term, cash interest savings will be at least partially offset by expected increases in CapEx, largely driven by gaming as we continue to invest in growing our premium installed base. We'll have some puts and takes by quarter based on the seasonality of tax payments, working capital and other items.

Speaker 3

But our annual cash flow conversion rate is expected to increase over time on the flow through of our highly cash generative businesses and as we continue to focus on capital decisions and returns. Free cash flow generation remains a key priority and a driver to enhancing shareholder value. In 2023, we continued what we set out to do, advancing our balanced and opportunistic capital allocation framework. Debt reduction, which we've executed and evidenced through our transformed balance sheet, returning substantial capital to shareholders through share repurchases, and lastly, disciplined investment in key growth opportunities. We returned $25,000,000 of capital to shareholders through share repurchases during the quarter, where a total of $170,000,000 returned during 2023.

Speaker 3

Since the initiation of the program, we have returned $575,000,000 of capital to shareholders, which is approximately 77% of total program authorization. We'll continue to monitor the market for opportunities going forward. As I mentioned before, we will continue to invest in our people and core capabilities to support sustainable long term growth and bolster our leadership positions with a commitment to driving high ROI, which exceeds our return thresholds. Our capital allocation priorities will always be in the context of a healthy balance sheet. That said, we remain flexible in evaluating all available options and will only deploy excess capital in the most value accretive ways to our shareholders.

Speaker 3

We have a great team here at Light and Wonder, and I'm extremely excited to be partnering with Matt and the executive team to take us to the next level. We continue to execute to our strategy that is core to our culture in a resilient and dynamic industry. What our teams have accomplished to date reflects strong momentum and best of all high confidence in our growth journey continuing. With that, we will turn it over to the operator for your questions.

Operator

Thank Our first question comes from Barry Jonas of Truist Securities. Your line is open. Please go ahead.

Speaker 4

Hey, guys. Can you give

Speaker 1

us an update on the road to $1,400,000,000 Maybe talk about how it's progressing? Thanks.

Speaker 5

Yes. Hi, Barry. Matt Wilson. We anticipated that question. First of all, for the Light and Wonder employees on the line, congratulations, what a fantastic quarter a fantastic year.

Speaker 5

I think when we started off on this journey, May of 'twenty two, we put our Investor Day targets out for 1,400,000,000 dollars It necessitated a 15% CAGR to get us there. We just closed 2023 with a 22% growth rate of the AEBITDA line, which was very impressive from my vantage point. I think one of the equally impressive things was all three of our businesses grew double digits. So the portfolio of businesses we have really validates the strategic decisions that we made to focus the organization around content. I think we have in place the talent, the investments and the product pipeline to continue this pathway to the $1,400,000,000 We've just kind of recalibrated our strategic plan and feel very confident we can get to the $1,400,000,000 I think this team is also doing a fantastic job just around cost optimization.

Speaker 5

I think they're equally as focused on sustainable growth as they are in efficient growth. So lots of pathways to get us there and we feel like with the year we just had in the quarter, we just had great momentum leading into the remaining years of that strategic plan. But Oliver, you may want to add some detail.

Speaker 4

Yes. Thanks, Matt. And hey, Barry, how are you? As Matt mentioned, we continue to have tremendous momentum across the business. We just posted our 5th consecutive quarter of double digit year over year revenue growth across all three business units, which obviously gives us a lot of confidence in our ability to continue to deliver on our growth plans.

Speaker 4

We know what we need to do to execute against our commitments. And in gaming, that's to achieve modest share gains in the core, core Class III. So in game sales, we demonstrated game sales growth in 2023 across both North America and Australia markets and we'll also continue to grow and expand the gaming operations premium installed base. The key for us will be the proliferation into adjacencies and we'll continue to deliver strong products into Oregon State Lottery And we also recently announced our deal with Lotto Quebec. We'll also be entering the Georgia coed market here in the first half.

Speaker 4

From a SiPlay perspective, we continue to drive record revenue and gross share as we continue to leverage our best in class SciPlay engine across the portfolio. And we expect to continue to scale ARPDAU while seeing stability in our player base. And that's going to be critical for us here over the next couple of years. We've made strategic UA marketing investments and we'll continue to do so effectively for long term growth. And Josh and the team are just have just done an exceptional job in that space.

Speaker 4

In iGaming, we expect continued growth in global markets, particularly here in North America as we've seen over the past couple of years. But more importantly, being able to leverage our proven land based titles cross platform as evidenced in some of the record game launches you saw across 2023. That's expected to drive sustainable growth for us into the future. And then lastly, Matt mentioned this earlier, our margin enhancement initiatives were a key contributor for us and it showed in our healthy margins, so not only in the quarter, but for the full year. And we just see opportunities to expand that over time as we continue to improve efficiencies throughout the business.

Speaker 4

So long short of it, our momentum and the performance in this quarter and 2023 really does give us a lot of confidence in our ability to capture the opportunities we see ahead to not only deliver $1,400,000,000 but to drive sustainable growth past 2025.

Speaker 1

I guess that's a good point for my follow-up. I think as the conviction of 1.4% grows, we're hearing some investors ask about what happens after that. Any chance you can give a little bit more color about how you see sort of the next steps beyond the 1.4?

Speaker 5

Yes. I think we've put together this organization of businesses that is a growth engine, will continue to be a growth engine beyond the 2025 timeframe. We obviously haven't put a target out yet. We'll kind of come back to investors probably in the next few quarters and kind of restate where we go beyond 2025. At the moment, we're laser focused on getting to that number, which there wasn't a lot of conviction for in the market a couple of years ago, but there is growing sentiment that it's an achievable set of targets.

Speaker 5

So yes, not guiding anything beyond 2025, we'll kind of reconvene with the investor base soon enough.

Speaker 4

Awesome. Thanks so much.

Operator

Our next question comes from Chad Beynon of Macquarie. Your line is open. Please go ahead.

Speaker 6

Afternoon, Matt, Oliver, team. Thanks for taking my question. Wanted to ask one specifically around gaming. Oliver, you just mentioned some of the adjacency opportunities like Oregon, Quebec, CoAAM, etcetera. But as we think about just the general replacement market, you're communicating with your partners in the U.

Speaker 6

S. And Australia, how does it feel currently? And how does this compare to prior years where the industry may have had elevated industry orders? Thanks.

Speaker 5

Yes. Thanks, Chad. I think, the industry seems to be on solid footing. I think we're seeing healthy player trends across all of our end markets. I think we did see some isolated softness in January in the U.

Speaker 5

S. Land based market in certain areas. And I think that was really attributed to weather. I think that's a kind of one time event that we cycled over. But aside from that really healthy end markets, I think one of the data points is uniquely interesting to us is the ILUS survey from Q4 and looking at specifically purchase intentions.

Speaker 5

So it does look like in that number forward looking purchase intentions by casino operators in North America are up sequentially in year on year, which I think is very encouraging. There was also a nice tick up in terms of their intentions to allocate their share to Light and Wonder. So I think the end markets are looking healthy. We stay focused on controlling the controllables, build great product and deliver great service to our customers and we'll win as a consequence of that.

Speaker 4

Yes. And just to build on that, Matt, obviously, we haven't seen any major shifts just from an operator's purchasing behavior. So we do see a pretty solid funnel demand here in Q1 and starting the early kind of stages of Q2 funnel. In addition, we also see solid data points from a coin in perspective and those are trending well with our high performing WAP titles. So broadly speaking, we don't see anything in the data that would suggest any major shifts.

Speaker 4

But if we do, we're well positioned to move and pull levers as we've executed on some really important critical operational enhancement initiatives. So overall, to Matt's point, healthy GGR levels, resilient gaming consumer, and we'll just be nimble if anything shifts.

Speaker 7

It's great to hear.

Speaker 6

Thank you very much. Appreciate it.

Speaker 4

Thanks. You're welcome.

Operator

The next question comes from David Katz of Jefferies. Your line is open.

Speaker 7

Thank you. Afternoon, everyone. So I wanted to talk about product and some of the standout what we've seen so far from Dragon Train, which is primarily, if I'm correct, driving Australia and not fully loaded and approved here in the U. S, right? That's happening over the next couple of quarters.

Speaker 7

If you could just color in for us what we might expect to see from that And just help us understand what other product introductions we might be seeing in those coming months that sort of drive us through the rest of this year also? And then I have one quick follow-up.

Speaker 5

Yes, great. Thanks, David. Yes, this is a product we're really excited about. We debuted this at the AEG Show back in August, subsequently went to market in Australia, very quickly went to numbers 1, 2, 3 and 4 in the Australian market, has really been dominating the New South Wales market. It was now in Queensland and Victoria.

Speaker 5

It's done very well across all of those markets. So kudos to the team down there that's built this market leading product. We're really excited about taking it to all of our markets, not just gaming, but taking it to sci play and also taking it to iGaming. The launch in the U. S.

Speaker 5

Is imminent. So it's a this quarter, next quarter type rollout event, pipeline is building nicely. But I think importantly, we've got a real diverse set of product that's driving interest from operators. I think again, pointing back to the ILS survey, we had a really nice release last week with a diverse set of games kind of lighting up the charts. So really encouraged by that and the teams across the globe, not just the Dragon Train team who we're really proud of, but the entire R and D organization.

Speaker 5

You can just really start to see the fruits of the labor that's gone into kind of turning the product strategy around showing up on the scoreboard in the ILUS results and that ultimately will show up on the scoreboard from a financial perspective. So yes, launch is imminent in the U. S. And will go across all of that channels and we're very excited about that product.

Speaker 7

Understood. And just one quick follow-up. I know, Oliver, you mentioned cash adjusted cash conversion in your prepared remarks. Is there a sort of notional target or normalized aspirational level, whatever other adjective we could put around it for what cash conversion you could get to one day in the future?

Speaker 4

Yes. Thanks for the question. Yes, listen, I think we look at free cash flow in a couple of different ways. One is, we're going to look at it from an annualized basis, 1st and foremost. So we know there's a lot of noise within some of the quarters.

Speaker 4

In terms of kind of guidance, we haven't really provided updated guidance there. But what I will say is that we see us optimizing our cash flow here and ultimately this is a great starting point for us and we'll continue to sustainably drive that higher over the coming years. But it will be some puts and takes here, but I think ultimately, we're going to scale from this point forward.

Speaker 7

Thank you.

Operator

Our next question comes from Rowan Gallagher of Jarden. Please go ahead.

Speaker 8

Yes. Hey, Matt, Oliver. Good afternoon. Good morning to people here in Australia. Question in relation to game sales.

Speaker 8

Outright sales obviously was a key feature this quarter. Obviously, you've talked about adjacencies, you're a market leader in Illinois. You've had some early success in Oregon, Canada. Can you talk through around the adjacencies, Matt, in particular sizing the market and the opportunity for Light and Wanda going forward, please?

Speaker 5

Yes. Hi, Rohan and everyone down under. Yes, the adjacencies opportunity is a big theme of the gaming story here in terms of growth over the next few quarters and few years. I would say it's a share taker strategy. These are markets that we've been delivering exactly 0% share in for the last 5 years.

Speaker 5

And so every incremental order we get in these adjacencies is naturally share gain. So yes, like you said, OSL has been a great opportunity for us. We're a market leader in that space now. Our product that we've rolled out is the best performing in that region, which is exciting. We should see subsequent orders coming off the back of that So this is expanding that partnership into the VLT space.

Speaker 5

So that's a 2024 opportunity, which is exciting. I think Georgia CoAAM, we announced our partnership with Betson. So we're starting to transact in that market. This is a kind of a multi year journey with the Georgia COAM market. And then historical horse racing, we were an early adopter here in the HHR world and it's proven to be a great tailwind for us.

Speaker 5

We're a market leader in that space. We command a leading share position. So as that market continues to expand, we naturally expand along that with great share in those markets. So yes, significant drivers for the gaming business, which I think is important. Like I said, these are discrete markets with unique opportunities.

Speaker 5

We've got the capability to build the product. And it's not as competitive as you see in the Class III replacement market. So we're kind of expecting more modest share gains in the Class III space, but really a big driver of the plan is these adjacent categories.

Speaker 8

And do you include Class II in your adjacencies these days?

Speaker 5

Yes. So we're active in Class 2 in many markets. So yes, significant opportunity for us. And I think that will be more in the kind of late 'twenty four, 'twenty five time frame as we start to expand beyond the tranche of adjacencies that I just mentioned.

Speaker 8

And the cheeky follow-up, if I may, Matt, and maybe directed at Oliver. ASP, obviously, was down materially, probably influenced by a significant order into the U. K. Oliver, could you just talk through what would be a more normalized ASP, recognizing the lumpiness that occurs during quarters? Thank you.

Speaker 4

Yes. Thanks, Rowan. Yes, as I mentioned in the prepared remarks, it was the UK order that had a mix effect on our ASP. We do expect that to be, I would say, somewhat leveled into 2024 as we proliferate into these adjacent markets. We know that these adjacent markets have slightly lower ASPs than your typical Class III replacement market.

Speaker 4

So, I would imagine that it will still be impacted from that perspective.

Speaker 8

All right. Thank you, gentlemen.

Speaker 2

You're welcome.

Operator

The next question comes from Ryan Sigdahl of Craig Hallum. Your line is open.

Speaker 7

Hey, Matt, Oliver. Good afternoon. Curious on Live Dealer. So nice to see that launch here adding Penn, some good updates there. But curious how quickly you think you can really scale this product given the enormous market opportunity with effectively one competitor out there?

Speaker 7

And then secondly, kind of along that, is the plan to lean in and expand more with DraftKings and Penn with bespoke and branded tables across different states? Or is the higher priority and kind of lower hanging fruit is to try and get active with more operators? Thanks.

Speaker 5

Yes, great question. We see Live Dealer as a multiyear opportunity. We believe in the outlook for iGaming. States will legalize naturally over the coming years. And so we just look into the future and say this will be a large and active market.

Speaker 5

We have the Shuffle Master IP under the hood in terms of a portfolio of assets. So it's a natural extension of our end market. So it's a market we're going to be in. Position ourselves for the long term here. So really in the near term, it's about nailing and scaling.

Speaker 5

So nail Michigan, continue to expand partners there, get it to a point, where we've ironed everything out and we're optimized. And at that point, we can naturally move into the other markets that are live at the moment. So we have no shortage of demand to take the product into other states that are legal at the moment, but we want to make sure that we've got Michigan completely nailed down and then we'll scale it over extended markets. But I would say the best way to think about Live Dealer for us is this market is going to be big, it's going to be vibrant over the coming years. And my responsibility is to position the business for success in perpetuity and live deal is a natural space for us to participate in.

Speaker 7

Thanks, Matt. Good luck, guys.

Speaker 9

Thank you.

Operator

Next up, we have Rowan Sundram from MST Marquee. Please go ahead.

Speaker 10

Thank you and good afternoon, Matt Oliver and team. Just the one for me relating to the Australia business. Given the momentum, the success you've seen thus far, what's the strategy to sustain and maintain that?

Speaker 5

Yes. Thanks for the question, Raul. Yes, particularly exciting for me having started my career in Australia and I moved to Asia. So just really nice to see the team down there delivering such exceptional results. I think the international business broadly delivered 93% year on year growth in terms of gaming sales, which is a huge growth number.

Speaker 5

And really the consequence of 2 things. 1 is Asia coming back online in a material way, but then also very impressive share gains in the Australian market, year on year up from 14% to 24%. This is a market we were at 7% to 9% share player and pretty irrelevant to be honest with you. So I think this is becoming a great contributor to our success. Obviously, the products that are driving our success down there are going to go global.

Speaker 5

But also it demonstrates just our ability to get into new markets, to make appropriate investments and deliver great returns. So yes, just gives us a lot of confidence in other areas of the gaming market that we can get in and explore. So yes, incredibly excited. Yes.

Speaker 4

And just a quick add to that, I think for us, it's much broader than just Dragon Train. I mean, we'll continue to drive our evergreen franchises, which really fuel the initial part of our growth here in Australia, and we'll have strong depth and breadth of product overall to be able to drive share gains over time.

Speaker 10

Thanks, guys.

Operator

The next question is from Joe Stauff of SIG. Your line is open. Please go ahead.

Speaker 9

Thank you. Hi, Matt, Oliver. I wanted to ask about North American Game Hops and just kind of how to think about the right levels of growth in terms of the main inputs, installed base and revenue per unit. Is there a way to think about just the installation of premium games throughout the year over the past 4 quarters in 2023, meaning that increased monetization will be lumpy in terms of kind of what sort of quarterly improvement we see in 2024? What straight way to think about that?

Speaker 5

Yes. Obviously, there's kind of 2 major drivers there. There's obviously install based growth and then what are we doing on the RPD side. So on the revenue per day, we've seen a nice sequential uptick in terms of the revenue per day and that really is driven by better product and a more premiumization of the install base. I think you'll see an inflection point in 24 from my vantage point with the portfolio we have lined up, kind of the complementary nature of the different cabinets we're launching and gains we're launching.

Speaker 5

We've done a lot of heavy lifting in the install base to make sure that our legacy fleet has been addressed with the appropriate amount of CapEx. So I think you'll see RPD is kind of in this range, and then kind of the net benefit will be as we start to expand the install base over time, that will be the tailwind that drives that revenue for that segment higher. But again, I feel like 2024 looks like an inflection point from where I'm standing in terms of the net adds you'll

Speaker 2

start to see quarter over quarter.

Speaker 9

And Matt, by that you mean essentially with your incremental new games, Dragon Train, Monster, Squid Games, most of those, at least in the earlier part of, say, the launch of those new games, are largely going to affect game ops first before they trickle down into the other segments. Is that fair?

Speaker 5

Yes. I mean those titles you mentioned specifically are premium gaming ops titles. So they won't be sold. They won't be taken to those other markets. So it really is in the U.

Speaker 5

S. A premium gaming ops story for those titles that you mentioned. And the portfolio is designed specifically for that. So yes, we're encouraged about the lineup and what it can produce for us in 2024 and beyond.

Speaker 9

Got you. Thanks a lot.

Operator

The next question comes from Jeff Stancho of Stifel. Please go ahead.

Speaker 11

Hey, afternoon. Matt, Oliver. Thanks for taking my question. So another strong quarter here in SciPlay, ARCO, up 15% year on year on an 18% comp.

Speaker 9

Matt, can you just spend a

Speaker 11

minute here on the forward outlook? More specifically, what inning would you say you're in with regards to harvesting returns on some of the investments that you've made into the centralization engine and ad tech capabilities? And to add to that, can you just expand a bit more on the side on the DTC rollout? What's left in terms of execution on product development? What levers can you pull to encourage user adoption?

Speaker 11

And how should we think about the cadence of adoption maybe relative to peers out there with more mature DC offerings? That's all for me. Thanks.

Speaker 5

Yes. Great question. I think, yes, Cyclades becoming quite metronomic about the way they just deliver outstanding result after outstanding result. Clearly, the fastest growing social casino company in the industry and taking a wild amount of share. And I think it all comes back to we've got a best class team with a really focused strategy.

Speaker 5

So we've made the right strategic investments about 2 years ago in the SciPlay engine, which just really gave us all the tools that we needed to make sure that we were driving each of our games efficiently. So again, nice uptick in upDAU, really holding on to our DAO across all the 4 major games. It was a collective effort across many games that drove this result. So in this business, the trend is your friend or your enemy. I mean, so for us, we're kind of up into the right with SciPlay and we have been for the last few years.

Speaker 5

So nothing suggested that will stall anytime soon. Great momentum leading into Q1. Yes, but I found a fantastic result for CYPLAY and what is apparently a challenged market. Oliver, anything to add

Speaker 4

or subtract? Yes, I think just a couple of adds there. I think we are also focused on developing our DTC platform, which we expect will enhance player relationship engagement over time. And that should hopefully accelerate our the potential of our expanded margins and then grow player lifetime values. The other thing that we talk about a lot is really just the continued prudent and diligent spend across marketing UA.

Speaker 4

Josh and the team are the best in the business driving high ROI over in this space. And so we'll continue to identify a number of these opportunities throughout 2024. As I mentioned earlier, we're doing concurrent marketing campaigns for Joel McHale and Jerry O'Connell. So the teams are looking to drive high return UA spend here and we'll continue to kind of evaluate that over time.

Speaker 5

Yes. And that may be specifically to your question about which inning are we in. I'd say we're in kind of early, middle innings in terms of the growth profile on the games that we have. I think, in relation to DTC, we haven't even sung the national anthem yet. Like if you look at our industry peers, they're putting 24% to 25% through DTC, we're less than 1%.

Speaker 5

So the optionality for us is all in front of us, and that's a great margin enhancement opportunity for us over the coming years.

Speaker 11

Great. Very helpful. Thank you both.

Operator

The next question comes from Justin Barrett of CLSA. Please go ahead.

Speaker 8

Hi, Matt. Hi, Oliver. Thanks for your time today. Just noticing you've had some great success on your international unit shipments over the last sort of 12 to 24 months and you've sort of made comments around UK and Australia. But I was just wondering if you could comment broadly on where you see your most significant international growth opportunities going forward, please?

Speaker 5

Yes. Nice to be with you. I think probably twofold, continued success in Australia. It's a large vibrant market. It's been stable and resilient for decades, and we expect it to continue that way.

Speaker 5

So continuing to take share in that market, I think with Dragon Train and other products, we're very early in the cycle in terms of what looks like a multi quarter, multi year opportunity for us in Australia. And then I think in Asia, I was back there in September of last year. I lived there for 5 years in a formal life. And just so fantastic to see that market back on solid footing. You see Macau coming back to life on the operator side and with the churn opportunity there, that's exciting for us over the next couple of years.

Speaker 5

But I think the really exciting opportunity is the Philippines. The Chairman of PadCall down there, the regulators has a mandate to grow GGR in a very big way. And so that comes off the back of investing in swap product and new IRs and we are a market leader in Asia. So I think Asia is a very exciting opportunity for us, but specifically the Philippines. So yes, looking forward to making the most of that opportunity over the coming years.

Speaker 8

Thanks very much.

Operator

The next question comes from Alan Franklin of Canaccord Genuity. Please go ahead.

Speaker 7

Yes, good morning guys.

Speaker 12

Thank you for your time. Hope you're well. Yes, a fair few of my questions have been answered. But just one quick one, please, just around post the Fireplay acquisition and just looking at the current leverage in the business, it does feel like this will trickle down over the course of time. But how do you think about your capital allocations plans going forward, please, in the current situation with the buyback program?

Speaker 4

Yes. Thank you for the question. Yes, our capital management strategy stays largely consistent with what we've previously shared. We continue to see the benefit of our strong balance sheet positioning us really well to take on value accretive opportunities as they arise. Specifically to your question around leverage, we are comfortably within our targeted range of 2.5x and 3.5x and we ended the year at 3.1x levered and that's following the completion of that of the SiPlay transaction.

Speaker 4

We believed back in Q3 that the SiPlay transaction was about a half a turn increase, but we were able to delever and capitalize on our highly cash generative businesses. Now that the FiPlay transaction has been completed and our leverage remains well within our target range, we will continue to be opportunistic with the share repurchase program. In fact, we've just created a more structured program, which we're now currently implementing. So long term, we continue to see this as a significant value creation opportunity for us. We were active throughout 2023 and in Q4 we repurchased about $25,000,000 worth of shares and from a full year 'twenty three point of view we spent $170,000,000 to buy back shares.

Speaker 4

So looking ahead, we'll continue to execute on our capital allocation priorities in a very disciplined manner, whether that's further investments in R and D and CapEx or other uses of funds. So we'll continue to evaluate that, but we're in a great place just given where we are from a balance sheet perspective.

Speaker 5

Maybe just one additional build there. We did a lot of heavy lifting through the divestitures and the strategic review to clean up the complexity in the portfolio. And what we have now is a very focused organization with a very clear mission about being the leading cross platform global games company. We want to stay true to that. I think that strategy has been validated.

Speaker 5

Like I said earlier, all three of our businesses growing double digits. So what you can expect from us is a management team that's very focused on being efficient around costs, but also with capital allocation, making sure we have a very high bar for anything M and A related and staying really focused on keeping the leverage where we've said it would be and buying back our stock.

Speaker 12

Thanks.

Operator

And our final question comes from Carlo Santarelli of Deutsche Bank. Please go ahead.

Speaker 13

Thanks guys. Just a couple if I may. One of them is going to be really quick. Albert, the termination fees within Igaming, is $6,000,000 the right number that you guys need to kind of comp for next year?

Speaker 4

That's correct, yes.

Speaker 3

Okay. And then moving on, if you guys and this might

Speaker 13

be a little bit more complicated, but if you guys were to just kind of take your installed base and the constituents of it between premium and everything else, as of the start of this year and kind of think about the win per day premium that, that will provide you as a base level of growth in an all things equal kind of domestic scenario in terms of slot GGR and whatnot. On a percentage basis, what would you kind of calculate that as before the additions, obviously?

Speaker 5

Yes. That is a pretty complex question. But I guess my initial reaction to that is we have seen a shift away from our public markets in store base towards the premium category. So there is a tailwind there in terms of RPDs because the RPDs in the premium category are obviously higher than the public. We do expect through 2024 for that to continue in terms of the ads that come into the in store base to be premium units.

Speaker 5

So that will be kind of incremental to RPDs over time. That's the way to kind of think about kind of the construct of our install base in relation to premium gaming up. So I'd say there's some upside here from an RPD perspective given the mix shift and then we expect our installed base to grow over time.

Speaker 13

Okay. That's helpful. And then just lastly, Oliver, you talked about R and D and CapEx investments and obviously some investments on the social side and whatnot. Could you kind of just try and quantify perhaps like the level of magnitude of these investments?

Speaker 4

Yes. No, thank you. Yes, listen, we know that R and D and CapEx or call this organic investments are critical component to our growth as we move forward. So we do see a combined R and D and CapEx target of about 17% at the total level. And obviously, that's at the gross level between, I would say, a 10% and a 7% R and D to CapEx level.

Speaker 4

So that's at the gross level. And ultimately, as our revenues continue to scale over time, that will just give us further ammunition to reinvest back into our core and drive sustainable growth over time. So this is absolutely an area of focus for us and we'll continue to invest organically as we believe that's the highest one of the highest returns of ROI for us.

Speaker 13

Okay. So the numbers go up, but the tethering to revenue stays broadly in that 17% range. Is that what you're saying?

Speaker 4

Yes, that's correct. And we'll continue to evaluate those levels as we move forward. All

Speaker 2

right, thanks.

Speaker 13

Great. Thank you guys very much.

Speaker 2

You're welcome.

Operator

We have no further questions in the queue. So I'll turn the call back over to Matt Wilson for any closing remarks.

Speaker 5

Thank you, operator. In closing, I would like to acknowledge our Light and Wonder employees whose commitment and dedication made the past year a success and provide us with great confidence for the future. Our global team continues to do inspiring work every day, delivering exciting new content for industry leading games, utilizing the latest technologies and creating an exceptional customer experience. We're excited about the opportunities ahead in 2024 as we continue to execute on our strategy in this dynamic environment. Thank you for being with us today and thank you for your support.

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Key Takeaways

  • Record revenue growth: Consolidated Q4 revenue rose 13% year-over-year and full-year 2023 revenue increased 16% to a record $2.9 billion, marking 11 consecutive quarters of growth and five straight quarters of double-digit gains across gaming, SciPlay and iGaming.
  • Gaming momentum: A record 37,000 gaming units were shipped globally in 2023 (up 40% year-over-year), with premium installations and fleet optimization driving 2% unit-base growth and in-store revenue per day increases in North America and international markets, while expansion into adjacent markets like Oregon VLT and Quebec lottery gains traction.
  • SciPlay outperformance: Social casino revenue hit record levels with Q4 up 12% and full-year up 16%, average daily revenue per user increased 15% to $1 and ARPPU reached $114, extending eight consecutive quarters of market share gains as the team develops a direct-to-consumer platform to boost long-term engagement and margins.
  • iGaming expansion: Quarterly iGaming revenue grew 13% to $70 million on strong U.S. and international demand, highlighted by record launches of PyroX 2 and Ultimate Firelink, live casino roll-outs in Michigan with partners including Rush Street and Penn Entertainment, and growing third-party content share on the aggregation platform.
  • Strong cash and capital discipline: Q4 operating income surged 57% to $155 million and AEBITDA rose 14% to $302 million, net leverage improved to 3.1×, and the company has returned $575 million to shareholders via share repurchases, while maintaining R&D and CapEx investments near 17% of revenues to fuel future growth.
AI Generated. May Contain Errors.
Earnings Conference Call
Light & Wonder Q4 2023
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