SGMS - Earnings call transcript Q2 2019

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Operator

Good afternoon and welcome to the Scientific Games Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Trent Kruse, Senior Vice President Investor Relations. Please go ahead.

Trent Kruse

Okay. good and Gary you, afternoon everyone. Thank

Mike call, results and today's With this Cottle we a will XXXX quarter me and Barry are second our morning operating period. discuss question-and-answer During Quartieri. performance by followed

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

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

We measure most be can in comparable financial website. non-GAAP and Investors GAAP our directly each found release as earnings our on a the also reconciliation non-GAAP in discuss non-GAAP the well of of certain section to as measures. measure A will press each description measure

reminder, and website replay is this of our being at As will call the section A in materials archived accompanying recorded. conference Investors a webcast scientificgames.com. this of be

slides reference website. Investor Relations on our supplemental are available Also

be reference not call. will results your to slides, company's to as of directly meant the to management While facilitate these slides review used be and document the the following a are speaking

Now, over let me to turn the call Barry.

Barry Cottle

thanks Thanks Trent. and Good afternoon for us. joining everyone

momentum some dive over Before created highlight accomplishments second the of to months. and we've to quarter XX into opportunity key the our have take we results, I the this want we last delivered

We debt from as $XXX share decreased X.X. accomplished on by net approximately AEBITDA our reduction position an reducing We target by to achieve proud are to our through well of First in X.X financial million as both and ratio our leverage foremost, that net track over we XXXX. this year-end to our and strengthened growth I'm debt debt. seven

accelerated AEBITDA accelerated this will continued achieve both through -- We growth and target reduction. net

our current will business target committed beyond this leverage of in continue firmly focus reducing to this X.X. are and We

assembled best the team leadership the we've in industry. Second,

ops. we strategic we such our new innovated delivered stabilized most open gaming SCiQ, Fifth, Third, solution. as and and wins platforms key betting sports industry-leading our as such systems, game critical end-to-end markets and like digital core in in open products unveiled iLottery, sports. SGVision iGaming, across compelling systems, North Fourth, and markets our we America platform OpenSports market new emerging

Sixth, our Social as very division's creating successfully we're focus as enhanced these to we've expense G&A in by expense efficiency base revenue an an lowering months. and on reduction of of last executing in almost over XX% recurring as in our And meaningfully XX SciPlay. wins, IPO business at management CapEx the proud addition our X% evidenced increase well

deliver. these and We're only as profitable most create experience the and player betting well that vision player I'm a Games to to sports players markets. very with to in market accomplishments proud well-positioned as emerging across best-in-class any a for Scientific positioning platform of to they growth play can best-in-class channel existing or seamless future want our deliver the lottery, across games,

during some key quarter. add and color me around let accomplishments some of the that the With developments these highlight second

First, we're both deleveraging reduction. AEBITDA firmly growth and committed debt to through

to our strategy. fiscally pleased execute continue that are disciplined We we

cash generated the repaid $XXX million quarter. Our debt, increased $XXX ratio flow X.X. we is net $XX down debt to income improvement for XX%, to million leverage We and operating million free in in

Lottery, best Social. who strong are We new Gaming, industry in have and leading leaders their Digital,

world. Director company former We in us join Aristocrat year Jamie and as build icon Gaming who Managing Matt gaming the enlisted Wilson, Odell, industry our a help have CEO, the will next gaming to best

and technology supplemented of pushes to experienced to on our of industry status and outside focused the strategic with These very great new who our quo business. are from combination appointments innovate industry leveraging reflect leaders, challenge advance talent the

We place. team, platform gaming with are best another have on delivering is to the work experiences the team great the in huge and a across yet leaders best we've and in to play. culture focused already the add we player thrilled This talent, build industry, such proven step to capable wants forward as any

by through market. deployment interoperability, We enhance results game both our improved This scale CapEx. and game analytics on heart most approach ROI. strategic to ops, all -- is stabilized North topline American keeping we franchises, achieved the leveraging of roadmap, our product players deliver and our content core maximize this by We at in best-in-class yielding and the market do creating

of -- is Ji this created wildly delivering the fronts. developed across the has It's on average above digital been of land-based has in successful customers well rolling in was moved that house is to focus is franchise. and example for The great in the U.S. out and game result Jin successfully Macau this now cabinets. multiple A Xi all Bao the Australia

first WIZARD three and top title OZ in the the top Drums new four new games in our was years The report. game & Eilers now times delivering Krejcik four is average. indexing recent house MUNCHKINLAND, the among OF launch is Dancing of Explosion the

began the up. JXX sales sales and Dualos brands XL Internationally, deliver X ramping cabinet in selling the quarter of two approved the and excellent now states top our results TwinStar is first game Australian cabinet results indexing continues process with in of initial in internal just Eilers Krejcik the and the top & are largest three to report. encouraging. was in our new In the fact our was We WAVE

international Encore and gaming that domestic substantial our we're Illinois of as to continue This market-leading legislation to on share player other in Boston ahead, will new enjoy ship share Illinois Looking its expands position We the footprint. is about gaming the received and leading provide and a in that and state potential of clear at opportunities. as grow expect potentially continue be we VGTs growth indications a the capitalize in VGTs by to created jurisdictions. excited Illinois Wynn, legislation in ship SG and the new state we significant new share

The systems improvement in partnership including Lottery customers. and strong in We five driven saw instant across increasing sequential products, revenue its revenue, increase and who SG-enhanced group year-over-year double-digit states a are significant is growth consistently profitability. by growth XX% in

Our million handle in most can we iLottery worldwide. the launch June $XXX in lottery's us Pennsylvania, exceeding in iLottery year fiscal ending the scalable platform iLottery ever successful launch gives a XXXX, deploy

tickets existing in is a our XX fact Lottery delivering last fiscal including reached market billion systems our leader, year best-ever $XX XX% industry strong instant continue lottery And when record of of of as we sales achieved this the in in product contracts. deliver markets and participation The year. in and last a division In key the win our instant poised share win rate its XXX% rebidding record rate lottery business. results to retail prioritized are contracts sales in to

ticket To our Lottery new products about demonstration the game ability really us instant better serve also for to James instant deliver technology, Bond-linked and ticket demand advanced increasing brands our our great instant meet we're launching multistate improved manufacturing our our to Also, leverage of units. Lottery allowing another capabilities. our business excited partners, across which we innovative speed-to-market is

eliminating increase SCiQ shrinkage product customers' in our virtually XX% driving Our sales, game XX% to at is retail locations. instant

at increase locations. across Florida In XX X-Eleven's an of in XX% over our fact new future. pilot our Walmart store seen And has SCiQ sales has the launched slimline

out, potential. rolling program excited is growth we're this just about As the

in we're existing increased X% In and Digital, markets. revenue and winning new

and press, Our as leader iGaming few New in approximately a name share Parks DraftKings, the U.S. with of attractive market and players business the to just the National customers added business the more gets Jersey And very market way. we've while key is its that's momentum is gaining iGaming the sport a lion's Penn own share including such on XX% in with new market the nine in

others. Wynn, at We're maintaining America Lottery, additional position retail capabilities North U.K. our Iowa as Don others Digital way. key adding to with than the over XX% including North over betting XX% and the these most market-leading bets Caesars, launching we Pennsylvania, bets people great of sports Oneida placed. accelerates have predicted, in sports Turkish Danish Caesars all states And Indiana, in Indian in mobile legislation also while partners America, of and Nation in like partners and and our in processing Best We're strengthen all Lottery, with on faster Delaware Lottery acquired launched

reliable robust, we solution, helped grow year-over-year. our million New iGaming With $XXX Jersey XX% to

Jersey, in major played we that role a the New leader market in success. As

saw increase OGS In fact, our placed with we wagers an quarter. placed of million billion on $XXX wagers $X.X over this platform

experience gain expertise and the continues to significant us to position grow iGaming our U.S., As global in share.

reliable emerging are preeminent wins poised with the our now we're investing player and billion-plus and and market believe $XX sports to We firmly to operators robust, in key be with platforms. comprehensive iGaming best support materializing the digital

outperformed June. business, including a I'm Social start. off our XX% market the strong SciPlay growth with QX, As In to we at in growth is look SciPlay happy to say, XX%

been we would away two have Our even since as first defective impacted in that transitioned months the from. software third-party by quarter growth issue a of the were better we've negatively

portfolio growth to our incredibly just This Party performance grow in we're issue's the continues not and we growth behind game which evidenced the the June, strong of the across and has Jackpot majority by above-market nicely. As back expect. us come to

the deliver expense the been us average quarter. were penetration AEBITDA structure effectively managed ARPDAU payer mobile revenue growth rate, payer consistently up. We XX% has a enabled case, for operating As variable monthly to per conversion and our which

support IPO company us mobile believe raise number mission the casual continue of with majority that to property, enabled fast-growing independently world. SciPlay operating and business one asset, a stake. Games end this the will business SciPlay The maintaining to We becoming Games value the while intellectual unlock on cash, in gaming of Scientific its the access and Scientific

June, the received recognized awards. Jin best for the platform at Asia winning OGS Ji OPS Bao BXB XXXX, the GXE industry. and the year electronic in EGR gaming award and we Xi the finally awards solution And at In we're won of Awards the being and

systems This XXXX and our signal that a recognition our throughout forward-thinking iGaming growth our beyond. game on franchises reliable world-class creating amplify and focus will is

by and positioning our for have markets. emerging front opportunities closing, across well In the future excited as we near-term us, in existing we're growth as profitable of best-in-class

As to that seamless player platform play, players Scientific you deliver. betting they the market want or vision only in across can to channel experience well-positioned and best-in-class can Games the sports player see, any to a most is deliver a deliver Sci with Games games, lottery to

This positioning portfolio our to games, our debt commitment profitable for of us outstanding and enterprise efficient with cash significant sets deleveraging and innovation up along on growth businesses path. delivering more and generation our a flow continue across diversified to reduce

turn the to provide of me let the call second to his review quarter results. Now over Mike

Michael Quartieri

afternoon Good Barry. everyone. Thanks

profitable the our This flow growth and and operational of innovation from content, delivering As Barry across path. continued organization you deliver just businesses. us entire focus deleveraging excellence allows our outstanding portfolio committed cash to continue generate heard to to is diversified

With results. second move on the that let's to quarter

For year cost the And quarter, cash debt increased consolidated $XX prior operating by X%. notes primarily million and million revenue Net $XX that successful decreased by interest maturity. offering period, was while expense the to driven debt related financing a loss slightly with the extended AEBITDA consistent was lowered XX%. income

Canada. We last our In of other lines be £X game by comparability and half April quarter down in limit the the in revenue year, in stake X%. sizable declined expect year continued ramping two business stronger results of sales northeast of U.K. openings the second the business. in Gaming driven XXXX the in this the strength overall the and our the of in include to implementation AEBITDA Items in of system in of impacting launches the growth

was U.K. revenue the due the on ops to sequential of quarter a basis in down impact million stake £X Game $X limit the

grew was performance game Canadian units legacy of driven $X.XX, in by installed U.S. base driven revenue Ji franchise, closure a lower-yielding by Bond Xi offset Our roughly our by decline Jin racino from strong XXX in was and MUNCHKINLAND of which Bao products. New a York yields constant and removal and our the the primarily where

and X,XXX the VGT from machine machines units versus X,XXX to U.S. sales Illinois globally, Revenue units the X,XXX in year. replacement market. decreased gaming last opening quarter including shipments includes and in We XX% which expansion shipped the in second $XX or Canada million

X%. X,XXX Internationally Year-over-year price ago. totaled shipments to for X,XXX our average was down units the compared year a selling quarter

with the WAVE pleased over with units performance of are quarter. XL XXX in full sold first We its the

from roughly see year-to-date. to In sold has industry-best X,XXX cabinet addition TwinStar we results to JXX date great continue nearly which XX,XXX including units units the our

two Australian we largest quarter. in the and Internationally Dualos expect X approved was in the have in the Australia states to states the in approvals end the quarter by of second third remaining

opportunities of WAVE the X the Illinois, half internationally. Dualos with near year in the the back the of TwinStar term cabinet strength We the the JXX ramp-up expect XL domestically related better and continued to market results and expansion in of

was installations by major down revenue from -- are Gaming XXXX in The from prior the installs. in hardware XXXX. by systems million driven early site to down ramping Canada expected and sales are year, primarily lower $XX throughout be major site completed

We revenue business million units are from prior new year was with including the working million products aggressively iVIEW by driven to XX,XXX the we to offset sold of strength our of this which Table this portfolio. $X $XX quarter. nearly up continued product X

Turning Lottery. to

and million equipment business, Our second year-over-year, domestic our was million XX% up the $XX to to largely or new increased million million driven contracts million from quarter $XX internationally in Lottery year $XX AEBITDA systems quarter. Within $XXX to by revenue sales $XXX and increased $X ago increased compared sales. million revenue our

and We launches continue to such and and virtual with lotteries in continue lotteries retail of and SCiQ and Circle as increase elimination Kroger work SCiQ. on average pilots an using shrinkage. X-Eleven, system game the XX% sales to chains Walmart experience major XX% of instant to to the Retailers K,

game. the are Bond instant of out James multi-state in rolling process In we products, the

power As our across leverage really brands businesses. strong can we of highlights Barry mentioned, the our this

$XX of generated we the from driven segment, SciPlay million paying an and $X.XX. XX% AEBITDA our up XX% ARPDAU to up year, up For year-over-year million. players XX% $XXX by revenue increase from to prior growth strong monetization was $X.XX increased were results or with These with to

generated we the year-over-year. resolution of issue, in June third-party increase XX% revenues in the month a the of Following

gives and In revenue Digital, in million customers a modular OpenSports in specific which $XX we our unparalleled recently launched U.S. our of generated million AEBITDA. of suite in $XX betting needs. to We portfolio meet the sports products their technology,

continue clear domestic launched In for moving our as iGaming, platform combined iGaming forward. to and new broader unparalleled great of a iGaming, a across in the sports business. this of sports number position and leadership and excess Jersey of market in opportunity New and quarter is tremendous With The we win games billion. U.S. potential $XX view we iGaming market the adoption

and debt flow our our flow and We and quarter, in times operating as ratio cash At year. Moving equivalents was $XX in cash cash end, $XX million sheet. million cash to $XXX in we prior increase the and from generated the to our flow which in million million balance was quarter net down had efforts. $XXX X.X cash continue deleveraging leverage free we

year, million $XX We Kansas XXXX. in was accretive included million highly down the our million million. during investments of in be to $XXX to $XXX for quarter, in $XXX year-to-date to million Maryland, Pennsylvania. total range projects CapEx expect bringing another compared expenditures million in the $XXX debt $XXX and long-term prior the paid capital which the in We capital to now

us to cash The debt. proceeds continue Social to from will enable outstanding reduce the IPO our

resources continuing needed to to efforts. our efficiently flow cash reduce our and deploying free We our balance and the while deleveraging generate enhance are sheet our enhance working to costs returns

open prepared can our questions. Operator, for concludes remarks. the up This line you

Operator

session will with question Please first now We ahead. [Operator the begin Instructions] Jonas SunTrust. comes go question-and-answer from The Barry

Barry Jonas

Thank you.

should Thanks. But we free to to walk some rate growth your think of some to I'd you're Just pick-up cash flow. your or more think thoughts LTM year pacing I Barry, composition. free can some on target flow rate? of say more the key on a start. drivers from and just hit -- should year one-timers through maybe this the going get about your those leverage we one-half love some hit a the higher think EBITDA you had to cash of drivers about last how you maybe impact that target?

Barry Cottle

paydown so the -- is priority Thanks a mentioned I this this be cash goal. the question financial at to business. from top my beyond and the Yeah, absolutely. for Yeah, by way. of of of balance X.X our as really get it's to and achieving flow, remarks to perspective, beyond top the free goal sheet the that We're there, debt improving firmly just range the X.X. it's combination really a committed growth in Look

will and out that traditional personnel is direction need the order and do of course, setting strategy to heard do, go the that and laid on we take core in to to terms drive bottom deliver started it strengthen growth the of our strategy we strategy to grow made of what When out at we stabilize -- the that and with the top we're moves America by after prioritize strategy really would to in North fund list getting one. think markets that right and this in what a number line game and then of you one of some really people basically kind And right at but company the was to -- to we've the top in that ability ops place.

at across performance continuing with to that content had that's It marketplace. in to strong seen to Xi the both one-two deployment coming our R&D also I see and signs appropriately hitting Ji significant the reversing with just -- last extremely starting interoperability, in re-segmenting reworking the stabilization with Jin that years and year perform content perspective some road talked get we've punch in moving approach prior in and now today. from to well ops rework we here at and mentioned, universe. the allocating Xx with over made with basically that I mid trend performance you're about the a a over out doing starts think the strides the after and seeing now against the as content-first that starts map Bao It marketplace America the Bond of really marketplace And we coming looking a North that's game market seeing

now to done kind enabled XX full works achieve XXX stabilization of across now XXXX. first since half also across and too. first CapEx content multiple content up over Jin XX% cabinets, more new XXXX, us ops from which have double, there placements Xi decreasing we've interoperability turnaround, we while our our had game Bao last has by call and in ops is of Ji now the – which than states swing this XX% we game officially to half

had that, high-priced XL. XX% would a Xi And JXX on game mentioned essentially is the gone that out we get great year Bao – if have had we call last at this on out ago Jin launched us WAVE example the of XX% and been think This hurt the on performance. faster only I where we Ji I any to units in the of floorspace have of out but the a enabled not cost, lower cabinet. And

and In addition I – we the call would Xx. be we we to that's a good those last at coming also think games MUNCHKINLAND delivering and that's mentioned up bearing on got the Dancing is I which out couple Explosion that Xx Drums had a two of marketplace. We've in thought performance

kind in on just now games and is really in nicely two and we've got ops. let's out got a and Fire game So, marketplace the it has performance a another better this been and year that Xx. Link which and being continues product in we've better Ultimate released call of performing additional better to get is – with two sleeper but now just And and moving later over additional

contribute seeing super to think those go we're we're the that bottom and and ops game we a to So about. line that's help going lot hit where about targets talked bullish we

for so super exciting us. that's And

And marketplace popped things we emerging. obviously opportunity. up Class in opportunities markets what to where where reworking is went saw and last we that lower-indexed we the we we was a horseracing at have road we you that is other what were re-segmentation and And it On map. the the there of and was historical that, did – other we real year out kind and things see like looked I mentioned where were X thing this

where have then we And the I leadership earlier VGT obviously, position. also expansion mentioned a Illinois

layer markets kind well top market we've of that. opportunities on segment got that So in those as of some

and again, first really half growth The in getting in strategy we're addressing stabilizing – a sales piece is second game to see through a markets traditional Gaming going the in our strong and of international. from second growing is – this kind of under tale XXXX. sales And position is of this game and where domestic

in now and highest-indexing lanes the And cabinet, front, up of We out swim we've international Australia We've to of we us lanes X. it got call to year. in most a – continuing set so also we second the for layering – major on front half that swim – behind just in lines feeding of is we've which in the those behind the in passed rolled for game states sales Australia. nice got amount we've content cabinet ramp-up on Dualos domestically the two the but On the now launched the the continues growth JXX WAVE the sell be which them that as have well of is top got ever the XL.

eight And out that and Dao we go and just have like six after we more WAVE exclusive. includes our Quick so Le are new into brands as games. approved Hit top XL Blue games have coming it games and of launched And Fu And that. we some the Red that we QX

And is Lock excited Drop about so the the what most excited we're games. 'N' I think

– coming hit at look We've us got got it the content the strong-performing the to just see we give in growth is the the to we're that the for we've expecting year that remainder starting think a we XL now got of it the volumes of to year. hit you we've and half out WAVE the going So back we've really and got if really want that JXX. again that's

of is core – that getting traditional addressing of that to when X.X kind one to number market. the core So is kind

and and lines. of have the continued kind us up On piece And few the – I product help other of will that, we business that continue is other lined I in X.X the momentum the other top to a sales growth. the across that enhancements hardware think I and talked get on of what that strong with believe Lottery to of we SCiQ got we've call about

we just again which dampened also of continue that to our to with issue. by grow SciPlay year-over-year continue But XX% basically margin with minutes technology of first was a to poised call -- ago, at earnings that a just is a contribute. couple had growth somewhat that strong will months

then And platforms have we're the we starting like. launch start continuing revenue moving new we and announcing investment the to these stage are and launching, the And generating and which -- each in digital sports as beginning and are through from to marketplaces these -- deals. getting to set -- we're the where still to up going they're states,

interoperability the stabilizing road prioritizing to time so the the set. and of gaming content with content we CapEx growing map, the get the make in And and of the spend have right to we teams working a space, which core sure the combination revamp and lot place

products the we top X.X momentum with emerging will get the think the and behind a what, to beyond. right about, opportunity there's we've on digital that to investment -- we ancillary need drive to order in for us and and the growth think then, that we of And businesses the real talked

Barry Jonas

Great. that Thanks answer. for comprehensive

doesn't that the Games more Scientific you me, for the could stock I maybe SciPlay. Just make reflect argument of full value one probably necessarily think

further could would make get the Thanks. disconnect. think to sense love this SciPlay just sales how potentially your equity I road? thoughts down And you about

Barry Cottle

look an -- with. think well you with I on extremely would enabled tell the is, be super what was value guess And what on we of, strategy smart mean you think I -- I'll look we've And happy SciPlay -- what was we we did say, I that I then unlock independent. Yeah. as marketplace. that the strong to created in entity said, we're sense

to growth. us it high XX%. But cash majority for share well-positioned strategically high to an hold raise -- a of is the very could debt. And use we And immediate a we a -- believe asset pay down that enabled

raised I raise think $XX to, anywhere And so, historically was we around cash. -- in that $XX over million. business $XX got off million million $XXX We putting to million,

cash strong the the to we've was compete a strategic what hold We it it. X So marketplace. got upfront. in them We independently to of maintained times And enabled keep in we the operate XX%.

hard we like. on, was it's -- the But the relative and long-term. That so, for create feel for us comment right just from in that strategic for that thing of perspective, still organizations. amount the the different a very to And both shareholder the value valuations organization the will move strongly highest

Barry Jonas

Got of the you this, if in driving it. jump And of half Mike, year. about second I I missed somewhat guidance but talk implies a the Can CapEx what's that? apologize

Michael Quartieri

of It's we new side, our year. half the press Yeah. on in with the some are planned through have investments back the that that Lottery technologies coming

the today franchise footprint, our As expected content well the Bond as we've outlined Explosion, seeing we're more increasing that going push out increases lease outperforming in actually MUNCHKINLAND, new out Dancing that Bond CapEx overall that's got market spend with that's now that's around that Drums gaming machines, as Barry content we footprint.

for spend it. So that's the planned

Barry Jonas

Great all right. Thanks so much guys.

Michael Quartieri

Thanks.

Barry Cottle

Thank it. you. got You

Operator

with question next from Stifel. ahead. Brad go comes Please The Boyer

Brad Boyer

guys. questions for Thanks my taking Yeah.

months is you as sort you perspective an sort guys look be some provide out out might on XX just to but as of over a to look And curious question. to can able But of just one that level. Barry's crystal next and you get First -- XXXX the ball extension question here.

derail, deleveraging there objectives? that Just lurking that? past in of where, there's sort payment cash years out any your one-time that could of potentially there Is be could a around Italy anything thoughts like today

Barry Cottle

to last you I'll the Yeah. renewals it number last of due kind and It's back year. that here. of And heavy it year look was through year. take contracts CapEx go abnormally and came higher level at that remarkable. When you new from that

the the at took depends what into When this RFP but year It see in that contract coming that given that takes place process of RFP that on delay challenge coming when overall XXXX. get the late renewal It spend you're CapEx the pushed is looking XXXX. we and the place. may in outcome was isn't Pennsylvania, anytime

that But it. other than that's

ticket the looked at quicker Italy on that spend funds actually nine-year to concession get because last CapEx the we're the that to year. and place But instant supposed in you their this got a accelerated extension that's was If take wanted able year. the same terms the payment government

any surprise into going through see to material and to XXXX impact. coming don't I type the going be large year of that are rest that payments this that of have is So

Brad Boyer

And slots. helpful. high-level a That's around question another Okay. then just question

the could of side the out I you. to thesis with and sales think placements of you the could you large there's and building bit to around potentially what there little anything that finance Thanks. some have today M&A guys be respect lease a That gumming place that? provide operator market be this taking on up you Are sort color helpful. have any would Do effect? that and lease product seeing that's

Barry Cottle

been think I look mean I consolidation's for happening a while.

not So it's new. honestly,

they operators general content. pay floor. are a great content the best to willing for in floor They need vibrant the So need on

all speculated And seen now. right and the so really have you strong so that announced been their -- we customers for point at -- at systems really them ours that we it of most haven't look have recently on us of anything mostly or and we're just this ones of business if

Brad Boyer

numbers Okay. last SCiQ. for obviously me around is the Thanks. I fairly you guys are talked mean, just And the about that impressive.

a Just limiting at factors point that curious are rollout that widespread product? the of more are this preventing of what some

Mike Quartieri

it, be got when you've think When I'll normal what you company. think procurement a you with dealing take you're really would your process it about here.

faster line, on to could increasing controlling If this them much there's give to process. do you're your of sales, what shrinkage able and delivery their procurement that bottom type a

state in their that what processes see with government and You remarkably typically different than aside just that realize dealing a got now you're to company. you set would are and

the look their process at of you when from budget lottery July out was funds been state. now Plus one apportioned to way their the their the the have so fiscal works, start year, new

July an given time in of that constant of half of have see do coming to X and they half therefore XXXX and the XXXX. through value we so XXXX the sale amount expect into the then that to you SCiQ, activity capital people a in expect in in starting fresh see sales be the we of forward results delivery So and of frame able would for enough spend increase back to increase now moving back had to these see

Brad Boyer

color. all Appreciate guys. Thanks the

Mike Quartieri

it. got You

Operator

go Katz question comes Please David Jefferies. The ahead. with next from

David Katz

Hi, afternoon everyone.

Mike Quartieri

afternoon. Good

David Katz

forth on them bring there back are and them -- customers of that globally in the larger try on there kind out fold or the any kind can't that whiteboard of necessarily are has I obviously, if the years other systems episodic your putting And have the which that resources systems larger as second point specifics talk just customers we these I there you're bringing that you away past in. lumpy. on to ask I'm kind about around the of question. were But days. business, And little that category out I a a couple would or few are and there wanted efforts historically of about backed if are But in a to curious over part ask of engagements been any have what so particular, been somewhat thought of bit.

Barry Cottle

Yes. XXXX, a of and I'll look And then are commented our on to lot have in to early that. large lot of when very starting then installs that I close up into pieces to I other those been comes move the now off the you business systems our business. as at right as of go resources tied Alberta contract. a on resources take and mean, Ontario the --

number look contract. very across of limited and at highly our the transformational Alberta accretive board, a are right. and So like when you large There the opportunities Ontario you're portfolio only

our drive systems that So sell business, IGT customer existing customers. own to from what a the be Aristocrat of to Konami. either or business. the in going our through a conversion honest, come from we they customer away either that and your value of And products large to that easier to heck a systems drive to the enhancements to by be going of of want Or a lot new can in system in and it's type advancements an new it's bring a taking to large-scale it's order existing

look out excited systems products generate the to we going and additional bring we to the in although we base and can existing that about order So off. of new the rolling Ontario to business be is through opportunities Alberta revenues at our that's got customer benefit We're them.

David Katz

Okay. very Thank much. you

Barry Cottle

You're welcome.

Operator

with ahead. question Please Macquarie. go Instructions] Chad comes Beynon from [Operator next The

Chad Beynon

my leader and managing growth to that the distributing revenue, believe and your in guys product instant Good products market here mid-single-digit tickets they're everyone afternoon. the for about Thanks has are the taking Gaming ticket I just manages wanted you believes I best you're I of of think ask which and straight manufacturing. categories question. obviously reported IGT domestic Lottery. quarters which in and is this one two

two with type help any a reporting, had But would if expect then, some just the might you Thank the of year back on there because the straight I should you. of And helpful. color you of it contract based what in be be Could believe disconnect? I half of declines quarters the other you're types? and explain we disconnect any believe this

Barry Cottle

we'd Yes. the of that type causes Hey, on revenue FASB it's this disconnect a to and thank rules like great to question new out for take writing recognition place.

you at look the so go was of recorded pre, and XXXX when you go percentage call on the of a and based through take revenues, our prior, lot If were place. to have revenue the it, actually retail and back sale contracts typically

that we control, Today with the tickets our box once revenue of new revenue. the recognition record rules, leaves

very business lottery is although the that and static actual instant side the warehouse in a lottery that, we've the client. like nice it of fact picked that to used warehouse, itself, we've run piece such because to leader marketing So which chain an be control market as the the we're a the lumpiness take got for supply steady SGEP truly used causes lottery's ticket much over And function where the program, a on of we I now SGEP us. the and, top to business on for and entire of say which instances hate and up the it

as further out and control, out further longer. recognition pushed for revenue when That strung gets that our inventory leaves further us actually get to to goal component and line the and therefore even causes that

at almost like that you So QX through. a when continues commented our on of ticket I as an to instant XX-month itself -- the over results period basis, this look to time, trailing and think got work really on I extended call,

So on contract type based have you the fluctuations will quarter-to-quarter, itself. just

back TICKET of In almost and addition, if generated GOLDEN $XXX say, really looked That at, in game which million in of type through sales that the kind states period over the XXXX a various success in nearly promotion, sales WILLY is time comparable well. also you providing that I'd remarkable was of the that early were benefit XXXX participated riding to we of retail more incremental as that. a and for tough extended WONKA

Chad Beynon

free you. of there I Thank the your on the rework where targets, focused on set balance opportunities And would which sheet of Are sheet. the payment, still on environment? one-time a given is just cash the Very for some call flow interest Thanks. comprehensive. come debt some the lot better getting you in outstanding but given you current a but with could then, the obviously, appreciate there, or maybe balance future? any here know, tranches opportunities obviously up about I of call talk it. leverage rates the just to are, to

Michael Quartieri

we remaining XX% sitting Yes, have notes look sure. still if I you out Absolutely, billion the at the -- the there. of mean, $X.X

that Now, $X.XXX steps call premium down billion. December come X, to

ourselves eye So portion we of refinancing of want and that to make that advantage on to we're keeping closely positioning very the that. remaining take an

the kind keeping -- we're close also a on sub-notes. I eye of

up You've that will prior are that basket up, year maturity XXXX. coming if on just utilize the sub-notes in restricted their capacity. got But coming one to note from we that do out maturity the anything

an the So making IPO at very to same future need we that to the for make we the eye And on effectively using especially proceeds and ourselves want we're about sure everything, sure we're that that. that to that have with those keeping cautious refis we time position we're do.

Chad Beynon

you Appreciate it. much. very Thank

Operator

next John question Please with from comes The ahead. go Gaming. DeCree Union

John DeCree

Hi, had my everyone. question. for I two. taking Thanks

ask, bit to little a provide Just wanted more if you detail. could

You've to strategic Matt. execute. strategy? signal be in was obviously Or to if there's they're any wondering change if and made Jamie a help able of going just I hires two

on a your just little could bit comment there. thoughts you If

Barry Cottle

to do so. Yes. in No, change strategy. happy No

strong games is In people they games. fact the I -- who are anybody success they proven know it's about Jamie Matt to anywhere to leaders would are with greatest and play. We want and executing and the -- gaming I And on love experience build say cultural deliver it both strategy. industry just that mean

work we're work. in mission go thrilled and them And make them to bring able on be so, with to to our that

we're superstrong do build really the Matt, building to at the And this I in look our addition people think, great completes team. leadership a and company. things goals if It particular, for staffing master team. gaming plan to you he's our of great greatest

this legends. led that look track fantastic. aggressive is our raised industry write and each mold nicely respective of hungry their really fits being to and of own that great Matt their to born and across been you of in which kind he's ready into businesses, BUs, And that for with rising passion our If stars success are gaming BUs of kind industry are have by and records

to with know partner -- as you for Derik that can make obviously comes work a coming guys board with help as across itself. an Matt we're roadmap, with content he's me mentor onboard then onboard. -- strategy, happen super speaks gaming his to that icon Matt to prior and us and the And excited that reputation on continue us really product just Jamie he He's help and and

super we're about So excited that.

John DeCree

earlier. Barry response Jonas' deleveraging the I that's jump Barry to helpful. back a little think question in to wanted I And to question

while hope we it's the of You've to you our outlined like your initiatives all work. business -- of have initiatives will And and all think across segments.

opportunities SCiQ, need look we get moderate in assessment your Gaming a kind only fair to mid-single VGTs a it leverage digit growth in have our at of Ops side. of do as Is really the EBITDA we target You Illinois model, mean to in doing I everything there. it's; number whether you're model say, our on

getting his at many level your ramp number question? of in the say, on mentioned given And Given of fair confidence Mike everyone execute difficult you to initiatives, least through response SCiQ, have of had timing to in to some don't you XXXX, is those how in it a is initiatives as initiatives have? to necessarily perfectly

generate that gauge things some to just getting of So you those EBITDA confidence hit wanted I to, to growth leverage need your to of that target? in kind level of to

Barry Cottle

smart said -- and way mean, you think GAAP we the probability the we of I don't well based the And we on which get that it we it level. our XXX of success And have doing high to it actually the I I the a and upside that that all would makes feel investment. them don't hit confidence upon to we you see so those have the opportunities is -- return board were prioritize confident. about -- so on No, across Yes. prioritize us that and

John DeCree

Thanks that. Barry. Appreciate

Operator

Stauff go with comes The next Susquehanna. from ahead. Please question Joseph

Joseph Stauff

process pushed game least or Good keeps of base. better I outlook afternoon. at understand right This how sort ops, of outlook it kind wanted in I install you -- to getting to the -- out. about operational basically know turnaround the it history the in think the is North and is for try in your company American the of

in closed quarter adjust was for wondering year the I the second guess get And I this was it. about numbers. pretty reasonable to to I North install base think how I'm time in your require wondering some level basically and some of going is flattish could assume sequentially. racino, year-over-year you some I big like Or look growth if that's that you it installed So at the America. base

Barry Cottle

I not you We impacted us in that perfectly over-indexed -- -- actually I under-indexed impact base numbers in specific called we the as premium. mentioned, out the WAP. mean were Yes. but were got Look installed speaking we've we're without on QX, the we to -- believe

the on model and at price game ops now reworked goal point. with and shots business product the we're penetrate across the the our right category great of We've product right have to starting to roadmap floor

We to that. print. that. player -- that with think signs seeing the it. of demand our the that get And both confident with floor operator and order by the going think We're yield then grow achieve then doing the along demand and we'll -- to we're have we can in We're we

Joseph Stauff

Okay.

the yield is strategy on that to of see forth, thus just So assuming that higher versus the assessment yield it in product per the longer. want you will more base. least strategy installed predict game portfolio so to sounds much the game, to -- per in harder obviously and and is out sort clarify at the there so is fair The basically far of factors. a may here. have I and sounds base But in and likely obviously as execution a new but base normally of as It are the so pay it installed number take the we installed though

Michael Quartieri

in coming That's a at fair the are ones that we Like because in existing six in footprint XX% you decline of footprint close years older X back look old. assessment are XX% excess games QX, they're like cabinets. that a the years old. of if games are nearly to of that commented those still was amount, on every X, to the sizable one probably say I'd They're

as that function operator, looking furniture And equipment so are years piece actually real games six as of when and more they do revenue-generating casinos you in these corners an than old are the sitting them. are a at of for

the best from about we units free that to those going get that as put going perspective. a flow we're So back, there come the opportunistic out be footprint possible we're very make cash sure to to return

So you're right.

on Absolutely. the see yield will side. it You

Joseph Stauff

that majority first IPO one guys stake. right? just large call reported, Okay. SciPlay, just after And On do this, where it it days follow-up. You something the the how XXX in quarter then Is think you tax-free have about nature? more distributing in Is you about could that large where you would those works? be basis? think in of being on majority something think more so Or May the a stake shares your do longer-term

Michael Quartieri

could proceeds used this future coming for. deleveraging. SciPlay spinning of cut to corporation back probably say was deleveraging That which whole was the back the with such of SciPlay division to corporate, sub I'll we with an purpose this here IPO offerings IPO any the purely into for unrestricted the would I'll become two and Social was at associated for that be in enable do consist into years secondary -- to going entity or purposes stock transactions ago

Joseph Stauff

Got you.

Okay. Thank you.

Michael Quartieri

You it. got

Operator

This any closing concludes the our over back turn Cottle remarks. to I to Barry question-and-answer conference would like for session.

Barry Cottle

joining to returns growth deliver will is and support. for delivering flow digital our ourselves allow today. greatest the outstanding while We efficient. continue our areas significant Thanks more for appreciate generate on in us stakeholders, focus emerging key your These deleveraging The cash making profitable on entire laser-focused market our business up to to path. set capturing share organization us Great. and games markets

hopefully seeing this look committed lot you. in in product you and our We're and this to to that you at a to year. forward of about next quarter to continue lineup beyond reducing sooner X.X. mid-October current our target or I firmly GXE leverage business we're really focus of showing will Thank you speaking excited

Operator

conference The has for attending now presentation. concluded. Thank you today's

may You now disconnect.

Light & Wonder (LNW) 2 Aug 192019 Q2 Earnings call transcript