Light & Wonder Inc Grover Charitable Gaming Acquisition Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Barry Jonas - Truist Securities - Analyst : Congratulations on the transaction. Apologies if some of this has to wait for the Analyst Day, but can you talk a little bit about the avenues for same-store growth from here to hit those revenue earnouts? And then maybe how should we think about the EBITDA or free cash flow margin as the business scales and develops further?

Question: Chad Beynon - Macquarie - Analyst : I wanted to ask about the competitive landscape. As you've moved into adjacencies over the past couple of years, whether it's VLTs, HHR, COAMs, it seems like some of those markets were owned from a market share standpoint by some of the smaller players. And then you and others kind of got into those markets. So as we think about this new E-Pull tab market that's dominated by Grover and then a few other kind of niche type of players. How are you thinking about the competitive landscape? Are there -- is it R&D? Is it regulatory? What's going to keep some of the other big players from competing here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 10:30PM, LNW.OQ - Light & Wonder Inc Grover Charitable Gaming Acquisition Conference Call

Question: Rohan Gallagher - Jarden Group - Analyst : Firstly, can I just reiterate that all the acquisition financing is in addition to or outside the scope of your FY targeted $1.4 billion adjusted EBITDA, please?

Question: Rohan Gallagher - Jarden Group - Analyst : And Matt, thank you for that clarification. Oliver, a quick question. At the back of the appendix you've got operating income of $82 million, $18 million D&A. Thank you for the clarity there. But you've also got $11 million of distribution cost to get to your $111 million adjusted EBITDA. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 10:30PM, LNW.OQ - Light & Wonder Inc Grover Charitable Gaming Acquisition Conference Call Can you understand or explain why the distribution costs are separated out?

Question: David Katz - Jefferies - Analyst : I wanted to ask about margins. It's interesting, listening, Matt, to talk about the way this business is fragmented versus your game ops business, right, which is much more concentrated, yet they seem to have the same margin. I'm just looking for a little insight, not certainly challenging, whether it's true. But how does this business get to that margin level with what I perceive to be more of a route heavy lift to it?

Question: Andre Fromyhr - UBS - Analyst : I was just wondering if you could comment a bit more about the earn-out conditions. I think, Matt, you made a comment earlier that the acquisition multiple at the upfront consideration gets better if they're delivering to targets. Can you just say a bit more about those dynamics?

Question: Ryan Sigdahl - Craig-Hallum - Analyst : I want to dig into the -- I appreciate kind of the historical context from a revenue growth financial perspective. It looks like revenue growth is actually accelerating to 20% over a five-year CAGR, 29% over the last two years. Despite when I look at Slide 10, not really entering any new states, a little bit Ohio, I guess, Kentucky expansion. But can you talk through kind of the industry trends from an organic same-state basis? And how you think that will play out with kind of the optionality of new state expansion being on top of that?

Question: Justin Barratt - CLSA - Analyst : Congrats again. Just wanted to ask, you made a couple of really brief comments around the fact that there are 11 states currently legalized -- that have legalized E-Pull tabs. But I just wanted to get an idea of how we should think about the potential for further states to potentially legalize going forward as well?

Question: Justin Barratt - CLSA - Analyst : Fantastic. And then the two priority states that you mentioned, Minnesota and Maryland, can you just give us an idea what are kind of barriers or hurdles that you need to get through to, I guess, move into those states? Is it simply regulatory approval and then setting up your operations there? Or is there some more meaningful barriers to entry to get into those states?

Question: Paul Mason - E&P - Analyst : I just wanted to ask a bit about the way that the math works for E-Pull tabs like from reading upon it, it sounds like it's pretty straightforward, sort of quite similar to like lottery math. And so just in terms of when you get around supporting some of your big franchises across like, is there much of an approval process to do that? Or is it actually like pretty straightforward because it's just like -- just a couple of numbers that you have to tell the regulator about.

Question: Rohan Sundram - MST Financial - Analyst : Just the one for me. And Matt, I know you talked about competitive landscape earlier and sorry if I missed it. But can you just remind us or just give us an overview -- who are the key players in this space currently? And how would you describe the barriers to entry? I know you talked about scale earlier, but that would be great.

Question: Adrian Lemme - Citi - Analyst : Thanks for that earlier answer then. I guess to clarify, would Arrow then be the dominant player in Minnesota and Maryland where you're looking to enter? And then the second part is you mentioned earlier that machine life is longer in this vertical than your Class III gaming ops. So does that create a barrier for driving growth in new markets because the machines on the floor are still good.

Question: Adrian Lemme - Citi - Analyst : And then just the second question on whether the longer machine life makes it harder to enter those new markets because you've got to displace the existing machine?