LNW - NASDAQ

Good afternoon and thank you for attending today's Scientific Games First Quarter 2022 Earnings Call. My name is Sam and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. [Operator Instructions] At this time, I'd now like to turn the call over to our host, Jim Bombassei Senior Vice President of Investor Relations. Jim?

Thank you, operator. Good afternoon, everyone. During today's call, we will discuss our first quarter 2022 results and operating performance followed by a question-and-answer period. With me today are CEO, Barry Cottle; and CFO, Connie James. Our call today will contain statements that include forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties 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 release issued earlier this afternoon, the 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, as well as in the Investors section on our website. On September 27, 2021, we announced that we had entered into a definitive agreement to sell our sports betting business to Endeavor. On April 4, 2022, we completed the sale of the lottery business to Brookfield Business Partners L.P. with the exception of certain lottery business subsidiaries, which are expected to close shortly. Beginning in the third quarter of 2021, we have reflected these businesses as discontinued operations in our consolidated statement of operations and reflected the assets and liabilities of these businesses as held for sale in our consolidated balance sheets for all periods presented. We are reporting our results of continuing operations in three 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 materials will be archived in the Investors section of our website at lnw.com. Supplemental reference slides are available on our Investor Relations website to help facilitate your review of the company's results, including an earnings presentation and historical recast business segment information. And now I'll turn the call over to Barry.

Thank you all for joining us. We are excited to be here today, given the great progress we are making executing on our vision and with the clear momentum we are seeing across our businesses. Today we are a transformed company with a clear strategy and a path to unlock value as the leading cross-platform global game company. The global games market is a $60 billion-plus opportunity and we are uniquely positioned to capitalize with our leading positions and our unmatched platforms and capabilities. Our vision is centered on five key pillars: number one creating great content and franchises across land-based, digital and mobile, as we look to increase share and drive our organic growth; number two, expanding in high-growth digital markets, growing our recurring revenues and fueling our high-quality earnings and cash generation; number three, enabling a seamless player experience through our leading platforms in an increasingly converging gaming industry; number four, delevering and maximizing cash, to fuel investment and shareholder returns; number five, fostering a high-performance culture, as we cultivate the best talent in the business. To fulfill that vision, we're quickly delivering on the promises we made just a year ago. In the first quarter, we made tremendous progress toward our transformation while also demonstrating strong momentum in our business. We grew consolidated revenue by 26% and consolidated EBITDA by 42% year-over-year. We continue to grow our digital and recurring revenues, with iGaming and SciPlay growing both year-over-year and sequentially with SciPlay, achieving its second-highest revenue quarter ever. And we achieved a major milestone, closing on the sale of the lottery business, which generated approximately $5.6 billion in gross cash proceeds. With this new financial strength and flexibility, we've established our capital allocation priorities to enhance shareholder value, debt paydown, share repurchases and investment in growth. We used the proceeds from the lottery sales to pay down debt, our number one priority, radically transforming our balance sheet. A little over a year ago, our net debt leverage ratio peaked at 10.5 times. And now post the lottery sales and our refinancing transactions, our adjusted net debt leverage ratio sits at 3.7 times, a reduction of approximately seven turns. We are well on our way to achieving our target net debt leverage ratio range of 2.5 to 3.5 times. We expect to get there with the closing of the sale of our sports betting business, which we anticipate will happen in the third quarter, subject to regulatory approvals. We also authorized a $750 million share buyback program in March and began immediately and actively repurchasing shares, executing on our second key priority: returning capital back to shareholders. Through last week, we purchased approximately $140 million of our stock, for a total of 2.4 million shares representing approximately 2.5% of our shares outstanding. We also closed on the latest in a series of targeted, capital-efficient acquisitions, to fuel growth and expand our portfolio. SciPlay acquired Alictus, a leading casual game developer that accelerates their expansion into the $20 billion casual market. And we acquired Playzido, a small acquisition that we expect to have an outsized impact on our ability to accelerate our customized iGaming content offering on OGS. In addition, to executing on our capital allocation plan, I also want to acknowledge the current dynamic macro situation that we're seeing, and how we're addressing it. I'm proud to say, that we've been planning proactively and have contingency plans in place to navigate the environment. One of the things, we've done well before the pandemic, was to actively assess and manage our cost base. Over the last two years, we've taken out nearly $100 million in our cost base reinvested into R&D and leveraged the other savings to maintain our healthy margin, a testament to how we drive efficiencies across the organization. Additionally, we were proactive and built up our supply chain talent, which has paid dividends helping us to navigate the current environment. There will be challenges from time to time and we know there's more to do, but we will continue to be proactive and execute on the things we can control as we've always done. And now I'll focus on the key highlights of our business unit performance. Let me begin with Gaming. As we continue to see strong market recovery, we grew North American premium game ops for the seventh consecutive quarter. It now represents 43% of our North America installed base. This outstanding result was driven by strong performance from Willy Wonka Dreamer of Dreams on the Mural cabinet and continued momentum of our Kascada Portrait cabinet with our proven Coin Combo and Ultimate Fire Link franchises. Revenue per day remained strong, especially in the North America premium segment and coin-in continues to outpace 2019 levels thanks to improved product performance. With the launch of our Kascada Dual Screen cabinet and a rich portfolio of content such as Double Money Link and Gold Fish, we are seeing strong numbers out of the gate and expect to see continued momentum with our proven Ultimate Fire Link franchise scheduled to roll out shortly. Our highly anticipated stepper cabinet Landmark 7000 will debut in the second half of the year giving us cabinets in every critical segment of the market. And we continue to see great progress in game sales, systems, and tables with year-over-year growth momentum we expect to build on throughout the year. We're seeing a strong demand pipeline for our iVIEW 4 hardware which now penetrates more than 60% of our domestic-connected systems units. And we're scaling resources to deliver on increased demand for system software and services off the back of these hardware upgrades. Meanwhile our Roulette X-ETG game is generating strong performance across the globe, outperforming traditional roulette by more than two times. And our recently acquired Adam Cashless tables product is continuing to roll out across the US market with over 650 units and strong trends on average transactions. Overall, we see continued momentum into April as the gaming industry remains resilient in this macro environment with strong player demand and GGR above 2019 levels. Turning to iGaming, the business continues to have strong momentum with revenue growing both year-over-year and sequentially. In the US, we were up 63% year-over-year and 21% sequentially with seven sequential quarters of GGR growth. The performance was fueled by the success of original content with our games generating 50% of the GGR on our iGaming platform, a record contribution. In fact of the top rent games in the US on our OGS platform, 16 of the top 20 were ours. In April, we launched in Ontario our largest-ever single market launch going live with eight operators on day one and with 20-plus in the pipeline. We've seen strong results from our content portfolio with games like 88 Fortunes and we anticipate this market reaching up to an estimated total of $1.5 billion GGR a year by 2025. Our original content continues to deliver as key standouts such as Rainbow Riches, MONOPOLY, and 88 Fortunes consistently ranked among the top-performing games. We also continued our momentum with our studio acquisitions with Lightning Box achieving record GGR for the seventh consecutive month and Elk Studio building on its record success from fourth quarter 2021. Our distribution and scale fueled the performance of great games like Chicken Box, Lightning Horseman, and Book of Toro. This year we'll be ramping up original content launches including evergreen franchises such as Money Falls, Coin Combo, and Gold Fish. And our launch of Live Dealer remains on track for the US in Q4. Overall, with our depth of proven games and experienced teams, we are well-positioned to capitalize on the global wave of legalization. Now moving to SciPlay. SciPlay turned in another strong performance, with revenue up 5% year-over-year and 2% sequentially. That revenue represents the second highest in the company history and an outperformance of the overall social casino market, reflecting the continued momentum they're achieving by investing and executing on their plan. SciPlay's Project All-Star enabled them to drive another record quarter for Gold Fish and Quick Hit, as SciPlay continues to grow their core games. Player LTV and retention are at all-time highs, while monthly average users and average monthly paying users improved sequentially. And the Alictus integration is going smoothly with two new game launches in the quarter and the addition of 28 million MAU, expanding our total MAU to over 30 million. Finally, we're very excited for the launch of Project X in the second half. Make sure not to miss a special sneak preview at the Investor Day next week. So there's great news all around, but there's also a new level of value emerging when it comes to our unique mix of assets and the opportunity to lead as land-based and digital gaming increasingly converge. We are already executing on our cross-platform road map by launching Gold Fish Feeding Time on SciPlay and in casinos with iGaming soon to follow. In the first week, 700,000 people played the game, even before we scaled it across land-based casinos and the payer conversion on day one was almost double what we've seen in any other games. It's a great example of us taking one of our key evergreen franchises and scaling them to a broader audience through coordinated deployment across our platforms and we'll share more on our cross-platform road map next week at our Investor Day. We're rapidly executing on our plan to transform our organization with a singular focus on launching games fully cross-platform. I want to thank each and every one of our creators for their incredible work this quarter. And now, for more on our financial results let me turn it over to Connie.

Thanks, Barry. Before we go into the results, I want to congratulate the team on the successful closing of the sale of our lottery business. The pace and scale of the business and financial transformation we've achieved is incredible. In just 15 short months, we have materially transformed our company. First, we refocused and streamlined our organization with the sale of our lottery business and the pending sale of our sports betting business. Second with these actions we have enhanced our financial profile with clear line of sight to sustainable double-digit growth on both the top and bottom line. Third, we've outlined our capital allocation priorities to enhance shareholder value and we've already made significant progress. Fourth we have transformed our balance sheet and credit profile paying down and refinancing our debt on the back of our lottery sales. And finally we have already begun to return significant capital to shareholders following our authorization on March 1 of a $750 million share repurchase program. Importantly, even with all of these strategic initiatives that the teams have accomplished we've continued to maintain our focus on operational excellence and executing on our day-to-day business. Let me touch on a few financial highlights in the quarter. Consolidated revenue increased 26% year-over-year to $572 million with growth across all of our businesses. Net loss from continuing operations decreased to $67 million as a result of our higher operating income, primarily driven by our double-digit revenue growth. Consolidated AEBITDA grew 42%, primarily driven by double-digit growth in gaming as we continue to see strong gains with market recovery. Our consolidated AEBITDA margin for continuing operations was up 400 basis points versus the prior year to 35%. From a balance sheet perspective, we made tremendous progress since our last earnings call. Following our closing of the lottery sale on April 4th, we took advantage of a window in the capital markets and moved quickly to pay down our debt and successfully completed a series of debt refinancing transactions delivering on our promise to transform our balance sheet. We reduced the principal amount of our outstanding debt from $8.9 billion at March 31st to $4 billion post the refinancing transactions. And our net debt leverage ratio declined from 6.1 times reported to an adjusted net debt leverage ratio reflecting the sale of our lottery business and refinancing transactions of 3.7 times an approximately 40% reduction. I can't emphasize enough what a significant and fundamental change this is for our business and credit profile. We were able to put in place a new term loan with a covenant-light structure take out some of our existing high-coupon debt and increase the weighted average life of our debt to 6.4 years. We saw strong oversubscription for our new term loan, reflecting our significantly strengthened financial and credit profile enabling us to drive favorable pricing. And with the expected closing on the sale of our sports business, we plan to take out more of our high-coupon debt, which is expected to put us squarely in our target net debt leverage ratio range of 2.5 to 3.5 times. No longer will we be burdened by the high levels of debt and the associated cost to maintain it. With the refinancing steps we have taken, we estimate annual cash interest savings of approximately $225 million on a run rate basis, a 47% reduction. And building on what Barry said, these are dynamic times but we continue to focus on what we can control and we've been proactive. We've taken a number of steps including a year ago instituting a global supply chain. We have driven efficiencies throughout the business with a specific focus on working capital and the cash conversion cycle. And we continue to leverage our offshore development centers to optimize our cost base. Collectively these initiatives are helping us to offset the current inflationary environment and rest assured driving continued operational efficiency is a top priority. Turning now to our business segments. In gaming, revenue increased 45% year-over-year to $355 million with AEBITDA growth of 60% to $171 million, outpacing revenue growth and translating to AEBITDA margin improvement of 400 basis points year-over-year. The performance was broad-based with double-digit percentage growth in all four of our business lines. North America gaming operations revenue and RPDs continue to pace above 2019 levels. And we're seeing a strong recovery in our UK and European gaming operations businesses, a testament to the market resiliency and our improved product performance. We also set another record for our North America premium gaming ops installed base mix at 43% of our total installed base. Game sales grew 87% versus last year with replacement units nearly doubling and on par with 2019 levels. We anticipate both replacement and new opening sales to continue to build throughout the year, fueled by our highly anticipated cabinet, the Kascada Dual Screen and Landmark 7000 stepper and a strong lineup of new games. Our Systems business grew 21% year-over-year. And while this part of the business has experienced somewhat of a slower rebound, we are now seeing strong demand for our iVIEW 4 hardware and anticipate increased deliveries in the back half of the year. Meanwhile, our table games business momentum continues as we added more subscribers to our reward program and grew our shuffler installed base sequentially, leading to revenues growing 35% year-over-year. While we are seeing continued strong demand for our products, we continue to navigate the supply chain environment which remains dynamic, noting that the impact has been principally limited to the timing of delivery. Looking ahead, we feel great about our Gaming business and how it is set up for long-term success. In iGaming revenues increased 2% to $59 million, primarily driven by growth in the U.S. and the acquisition of Lightning Box and Elk Studios, U.S. revenues increased by 63% versus the prior year, driven by strong original game launches. AEBITDA was flat in the quarter reflecting our investment to launch Live Dealer in Q4 and as well as our increase in our first-party content. Our AEBITDA margin was approximately 36% for the quarter, in line with our expectations and reflecting these investments which should fuel growth in the back half of the year and beyond. Overall, our iGaming business continues to have great momentum with our original games continuing to drive strong performance, coupled with our upcoming entry into the fast-growing live dealer market in the U.S. Finally SciPlay continues to have strong momentum with another great quarter growing 5% on the top line and delivering its second-highest revenue quarter ever. AEBITDA was $44 million with a margin at 28% in the quarter, in line with our previously provided guidance. SciPlay continues to invest in its city engine and live services to drive future growth and we are seeing the benefits show through this quarter, with improvements in key metrics including payer conversion of 8.9%. With its sticky player base, strong monetization metrics and low capital intensity the business continues to be highly cash-generative. Now turning to our cash flow and capital allocation priorities, while free cash flow in the quarter benefited from the strong revenue growth, this was more than offset by higher working capital uses and somewhat higher CapEx. As expected, the increase in working capital was principally driven by costs associated with the strategic transactions as well as investments to meet the growing demand from operators for our products. Post finalization of the divestitures which will collectively generate $7 billion of gross cash proceeds we see free cash flow conversion continuing to improve as we benefit from our strong growth profile and the transformation of our balance sheet. Importantly, as we outlined in our last earnings call, we are taking a balanced and opportunistic approach to capital allocation to enhance shareholder value, underscored by three key priorities. The first, debt reduction, to a target net debt leverage ratio range of 2.5 to 3.5 times which we are fast approaching. The second, share buyback, returning substantial capital to shareholders with our $750 million share repurchase program. As Barry mentioned, through the last week we have purchased $140 million of our share and we will continue to be active purchasers of our shares at these levels. And third, disciplined investment in key growth opportunities, prioritizing using capital for buybacks, debt reduction, and organic investments, unless M&A delivers significantly greater long-term value. We've recently made key acquisitions which are very capital-efficient and when married with our leading positions and capabilities further accelerate our growth strategy. Wrapping up, while we've achieved a tremendous amount this past year, we continue to be laser-focused on operational excellence and drive continued momentum in our business. We've made significant progress delivering on our promises and we're just getting started. With that we'll turn it over to the operator for your questions.

Thank you, Connie. We will now begin the Q&A session. [Operator Instructions] Our first question comes from the line of Barry Jonas of Truist. Barry?

Great. Hi guys and thanks for taking my question. Can we dive a little deeper into the inflationary and macro environment? Some operators have noted seeing weakness at the low end. Curious, if you're seeing anything as you look across your segments and that's either from an end user or an operator perspective? Thanks.

Thanks Barry. Macro environment clearly is a question on a lot of people's minds, so I appreciate you raising that. There's no doubt about it, the market is very volatile at the moment. However, if you take a step back and looking at our sector and our performance in particular, we continue to see elevated GGR levels even as recently as April. And I think that's a real testament to the fact that players across the spectrum love to play games. And it truly demonstrates I think the durability and resiliency of our business. And we do that whether we're looking at gaming, iGaming or social. We're actually seeing strong and growing GGR across those three markets. And where we have a view into the high end and the low end of the sectors, we're seeing demand on each side. This is an example on SciPlay growth in payers, not just the revenue per payer which comes in on the high end. So, we're seeing demand across the spectrum of the market. And look, I think again all this proves is our industry is very resilient to these various cycles. And all that said, we're obviously continuing to monitor but we remain confident in our ability to execute and grow the business across the board.

Perfect. And I – hi Barry, great to see you. I might just add one additional thing which I think the beauty about our business is, we get real-time data into what's happening. So in gaming as an example, I often enjoy my morning coffee looking at the coin-in trends and they just continue to remain strong. So as Barry mentioned all signs are pointed in the right direction.

Great. Great. I really appreciate that color. And then just as a follow-up I wanted to touch more on supply chain. How much pressure are you seeing cost-wise and are you able to pass that through to customers? And then I guess the other side to supply chain are delays, has that impacted sales one way or the other?

Sure. And happy to take that one, Barry. There's no doubt about it similar to other industries and companies we are having some impacts on supply chain. But for us they've really been timing in nature. I think the good news is that, we were really proactive and instituted a global supply chain about 18 months ago, bolstered the talent to navigate through this. We've been able to drive some cost efficiencies, which have allowed us to maintain a number of healthy margins. In terms of past what we continue to focus on is building premium content and cabinets. And based off our ASPs, I think you're seeing that those levels continue to be high. And so that's a real positive for us. And when it comes to timing, I wouldn't say, there's something specific. There's probably one area that you would have seen in the results as – some of our systems opportunities, have shifted a little bit more towards the second half. But all in all again we continue to be proactive, and it's more of a timing issue than anything else that we're seeing.

Have any competitors had some issues that you've been able to take advantage of?

I can't necessarily speak on behalf of the competitors. I think we're really well positioned is that, we planned ahead for the last two years for this moment in terms of the market coming back. We've leaned into a little bit of working capital taking certain inventory positions to be ready for the turnaround. So again we feel really good about our ability to meet market demand.

That's great. Thanks, Connie. Thanks, Barry.

Thanks, Barry.

Thank you, Barry. Our next question comes from Ryan Sigdahl of Craig-Hallum. Ryan?

Good afternoon. Congrats on the results. And thanks for taking my question. Curious, if we can start on the acquisition and maybe how it's complementary to OpenBet or competitive. I guess, I've always thought of the companies that have their own remote gaming server. They were able to do direct integrations with operators versus using an aggregator like open gaming. So I guess how is it complementary versus competitive with that acquisition?

Absolutely. Ryan I'm assuming you're speaking about Playzido. So Playzido is – by the way we love the outside – the outsized impact that Playzido is going to provide for us. Playzido is actually an open game development platform. So think of it as an RGS with some game frame technologies. And what that allows us to do at scale is to rapidly provide customized game development. So we can provide customized and exclusive content for our major operating partners, which they've been asking for. So for us it was a really efficient way to get into these capabilities immediately. These have been on our road map for quite some time, because we've been engaging with operators about customizing exclusive content, which they want to have on as a part of their offerings. And this enables us to create kind of quite frankly the best-in-class offering of this. So this plugs right into OGS, and just makes OGS that more scalable and helps us bring in a whole other type of content at scale and speed which we weren't able to do before. So it's a huge win-win for us and for our operating partners who have been looking for this content.

Maybe one follow-up on that, Barry. So is it primarily focused to the operator say DraftKings but MGM et cetera that are developing their own content to help them do that better and faster, or is this for content creation kind of third-party studios or both?

It will serve both, but it will clearly -- the major operators that you named were -- have been looking for this type of content and ability to provide differentiated offerings in the marketplace. And this was quite frankly the best -- kind of best-in-class platform that was out there that was able to do it and kind of the perfect one plus one equals three here is -- as you know OGS has -- is distributed in every major operator some exclusively. So for us to plug it in there that basically -- it absolutely creates a great way to address that -- the major operators that are looking for that. But for second parties as well if they want to create things off of their own customized game frame, it opens it for that market as well.

Great. Makes a lot of sense. One other one for me. So just on the premium lease good to see you continue to take market share there grow that mix. Steady progress 43% of the total installed base mix this quarter. What's your confidence in continuing to grow that over the next several quarters and years? And is it logical to think that can get to north of 50% as we look out a few years?

Thanks Ryan. And glad to see you pick that up. It's part of our portfolio that we're really proud of. We've spent the last two years really gearing up to make sure we've got amazing products and content to scale this portion of the business. Our ultimate goal here is to drive share. We've been explicit about that. And I think you're seeing that momentum happen today. We see upward trends of ideally half of our installed base being premium in nature so plenty of runway. And again, we've just got phenomenal products to support that. And it's an area that I know Barry is super excited about. And Barry I don't know if you want to touch on a few of those products.

Yes. Ryan, look, I could not be more excited about where we sit today in terms of our product lineup and the product road map we have. If you look at it for the first time, we'll have a complete portfolio of global products that cut across all four critical segments. So, you've got Kascada, who's off to a massively fast start; Mural as well; and then coming online Kascada Dual Screen which is in the market now; and then Landmark 7000, which is coming out at the end of the year with -- in the separate category. So we cover all four major categories, and it's backed by probably our best utilization of major franchises to date. So against Kascada we've got Quick Hits, Ultimate Fire Link, Jin Ji Bao Xi with Mural. We've got Monopoly, Willy Wonka, Wizard of Oz; on the Kascada Dual Gold Fish, 88 Fortunes; and we've got -- for LandMark7000 we have our Legendary Blazing 7s -- Triple 7s product coming out. So great products, great games all built by best-in-class game designers probably the best group of game designers we've had within this organization. So I love where we sit today as we look out the rest of the year and into next year and I'm very confident that we're going to continue to take share and grow the business. Thank you. Ryan.

Our next question is from Jeff Stantial of Stifel. Jeff?

Hey, good afternoon everyone. Thanks for taking my questions. I wanted to start on Live Dealer if possible just given we're coming up not too far off from a launch there. Barry, do you mind just kind of framing a little bit? Like what are some of the investments going in? Where are you at? And sort of how should we think about the time line for you to kind of ramp the revenue contribution there once you do go live in mid-Q4?

Yeah. Great question. I'm happy to say that our first Live Dealer studio is scheduled to launch in the US in Q4. And what's important is we'll be live with the three major products Blackjack, Baccarat, Roulette which represent over 95% of the turnover in the US. In addition as a part of our offering, we're targeting some exclusive content that leverages our best-in-class table IP which is highly customizable as well for the operating partner. And we're building out the studios and we're on track for that Q4 launch. And that's why we're so pleased with our progress, especially given that Live Dealer is the fastest-growing part of the iGaming market and is projected to be 30% of the US TAM.

Understood. That's helpful. Thanks, Barry. Then maybe if you don't mind, if I can just follow up on a question earlier on the Playzido acquisition. So it sounds like the real strategic add here for your portfolio is on the customized game development. Can you just kind of walk through the decision point for an operator? Obviously, some of them have been vocal that they have the intent or the desire to kind of build their own games themselves with their own internal staff. Is there still value going this route for those operators? Are you targeting more operators that don't have that internal game development staff and those kind of capabilities? And kind of how should we just think about the opportunity set and maybe how the operators think about the value add and the economics here?

Sure. This acquisition actually delivers what they're looking for. So what our partners are looking for is exclusive and customized content that they can offer to their players. That's the sole reason why they're looking to get in that space because our operators want to differentiate their offering with UI/UX with marketing and merchandising and with product. And we are able to with -- particularly with this acquisition of Playzido at scale deliver some of the best games built by the best game designers in the world, but deliver it in a customized exclusive manner. And that addresses exactly what our major operators are looking for. So this was actually hitting dead on with a segment of the market that we can actually play in and provide better than anyone else.

Thank you, Jeff. Next question is from Chad Beynon of Macquarie. Chad?

Hi. Good afternoon. Thanks for taking my question. It appears that we've seen a nice improvement within the slot replacement market in North America from you and your competitors. I was wondering if you could just kind of expand in terms of where you think the market is versus 2019 and more importantly, if the operators that you're partnered with continue to expect to repurchase or replace new orders as we kind of get through 2022. You talked about some of the really good content and product that you have in the pipeline, but just trying to figure out where the purse strings are? Thanks.

Sure. And thanks for the question. Thanks for being with us today. Overall, I'd say that we're hearing really optimistic tones. I think we heard that on a number of the earnings call earlier this week in terms of the market rebounding. The exciting news to your point is in the quarter we saw our game sales return to somewhat close to 2019 levels, which I think is just a great sign of CapEx cycles continuing to return. Again, always cautiously optimistic. But right now with what we're seeing in some of the macro trends that Barry provided earlier, we expect kind of CapEx to start to return back to normal towards the end of this year and fully recovered by 2023 specifically in the North America market I'd say that's somewhat similar when you look at our European businesses as well as Australia I think has got some great momentum behind it. So again cautiously optimistic but trends are definitely going in the right direction. Barry if you wanted to add anything?

Yeah. Look I would just say if you step back and think through the strategy that we rolled out we've been prioritizing the three largest profit pools in the marketplace; number one, premium game ops, North America game sales, and Australia. And if you look a year ago to where we're at today, we are much better positioned. We've seen dramatic progress and success. And as I mentioned earlier, I think we have the strongest product lineup across both sectors of game sales and game ops than we've ever had. And so we're very bullish with where the market is going the operators and how they're perceiving the market and our ability to again take share and grow our business in this space.

Great. Thanks. And then regarding cashless initiatives and acceptance, you noted the strength with iVIEW 4. Can you talk about any recent successes that you've had in this segment? And should we expect further acceptance from a regulator and more importantly an operator standpoint as we get through 2022? Thank you.

Yeah. So we're very pleased where we stand. As you mentioned I think the really strong demand on iVIEW 4 I think we're at now 60% of our addressable base there. Huge piece of that is driven by the momentum that we're seeing now in cashless. And we're really pleased with where we stand relative to the position. We have a leading position with 50% of the share on systems and our cashless offer is now live with nine states and 15,000 EGMs. And our pipeline is just continuing to build. And so -- and in addition to that we launched our AToM product, which is a cashless product that covers the table business. So again we're in a really great place. We have multiple casinos in the pipeline both from a deal but also in execution mode rolling out. And so we're very confident with our offering. And we have as I mentioned before an unmatched position to deliver this for our partners.

Thank you Chad.

Operator, we have time for one more question.

Okay. Our last question comes from the line of

Hi, good afternoon guys. So I noticed that SciPlay had recently appointed three new Board of Directors. Just curious if there will be any impact on the strategy for the segment moving forward in light of the news?

The additional directors to the Board, was actually to support and to reinforce the strategy that SciPlay is pursuing. SciPlay has great momentum now leaning in and growing their social casino business building their new pipeline of games entering the casual space and developing their SciPlay engine. And the group of leaders this all-star group of folks that we've brought on to the Board provide a deep level of industry expertise that we believe help SciPlay to get to the next level. And they all have broad and different perspectives that they can add to the value of the team. And so, we think it was the right move at the right time to get a team in to help us build a diversified global game company.

Got you. And you guys just bought back $140 million in shares with the stock at a near 52-week low. I mean can you just talk about the cadence of share buybacks over the next few quarters with where your balance sheet is at?

Sure. First of all, I'd love to just reflect how great it is that we can have this conversation compared to where we were a year ago. And as we've talked about before we've developed a framework on capital management and Connie will talk a little bit more about the shareholder repurchase. But as a reminder our priorities for capital allocation are: number one to pay down debt to create a healthy balance sheet and put us in that 2.5 to 3.5 times; number two, share repurchases, which we're placing emphasis on our share buyback program; and number three, we'll continue to make disciplined investments, both organically and inorganically, to ensure that we can be sustainable and profitable. But with any M&A that we pursue we must significantly outperform the returns from the repurchasing shares. Connie, do you want to talk a little bit more about...

The share repurchase? Yeah, sure. And glad to see you pick that up. It's interesting, as Barry mentioned in some of his opening remarks that these are dynamic times and I believe that that's also when a number of opportunities can be created. And the good news is with our financial strength and the growth path that we see within this company, we can take advantage of dislocations in the market like what we're currently seeing and create tremendous value for our shareholders by buying back our stock. And that's exactly what we're going to do and what we have done to date. So, just a couple of key highlights. We've been moving with speed on the program. We implemented a 10b5-1, which allowed us just to maximize the number of days we could be in the market. And as Barry mentioned, it will continue to be a key pillar of our capital management priority, because we see just a tremendous opportunity at the moment for us to drive significant shareholder value.

Great. Thanks. And we'll turn it over to Barry for some final comments.

We've made tremendous progress this year, delivering on a number of key promises, which have transformed our company and positioned us to unlock significant shareholder value. With the closing of the lottery sale, we've streamlined our organization and significantly strengthened our balance sheet, providing us with the financial flexibility to invest in our future and return capital to shareholders. We are now singularly focused on building great games and franchises and deploying them across platform. Our position is unmatched and now we have an unparalleled opportunity for growth. We are very excited about the next phase of our journey and look forward to discussing our key strategies and the path to drive shareholder value at our upcoming Investor Day on May 17 in New York City. We hope to see you guys there. Thank you and – thank you for your time and support.

Thank you everyone for joining our earnings call. I'll turn it back to the operator.