Light & Wonder Inc

NASDAQ:LNW

Earnings Call Transcript 2022-Q2

[Operator]

Welcome to the Light & Wonder 2022 Second Quarter Investor Conference Call. [Operator Instructions]. Now let me turn the call over to Jim Bombassei, Senior Vice President of Investor Relations for Light & Wonder. Mr. Bombassei, you may begin.

[James Bombassei, SVP, IR]

Thank you, operator. Good afternoon, everyone. During today's call, we will discuss our second 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 the 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. And subsequently, on June 30 of this year, we entered into an amendment to the definitive purchase agreement.

During the second quarter, we completed the sale of our Lottery business to Brookfield Business Partners. Accordingly, 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 3 business segments: Gaming, SciPlay and iGaming. Amounts and disclosures referring to combined include both our continuing and discontinued operations.

As a reminder, this conference call is being recorded. A replay of this webcast and accompanying materials will be archived in the Investors section on 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 now I will turn the call over to Barry.

[Barry Cottle, CEO, President & Director]

Thank you for joining us today. This is a pivotal year for Light & Wonder, and I'm excited to discuss the significant progress we have made transforming our company, as well as the success we are seeing as we execute on our road map and delivered strong operating performance this quarter.

When you look at what we've accomplished, you see clear evidence of our ability to deliver on the promise of transforming our company and to drive significant value for our shareholders. We completed the sale of the Lottery business, enabling us to delever and reconstitute our balance sheet. And we proactively amended our Sports Betting sale agreement, increasing the speed and certainty by creating a simplified path to closing the transaction by the end of Q3 at a strong valuation, bringing in $800 million gross and approximately $700 million in net proceeds.

Together, these 2 dispositions will generate approximately $5.6 billion in net after-tax cash proceeds, and it represents the final step in the process of streamlining our organization. To that end, we are poised to further enhance shareholder value through our capital allocation priorities: debt paydown, share repurchases and a disciplined approach to investing in growth.

With the proceeds from our Lottery sale, we paid down our debt, enabling us to achieve a net leverage ratio of 3.6x at quarter end, a 7-turn reduction from our peak leverage just 18 months ago. Additionally, since we announced our share repurchase program in March, we have bought back $203 million or 3.7 million shares, approximately 27% of our $750 million authorization, or over 4% of our market cap in just 5 months.

With our streamlined organization, sharpened focus and strong balance sheet, this all creates a powerful foundation to build from as we execute on our vision of becoming the leading cross-platform global game company. The opportunity here is enormous. We are squarely pointed at the $70 billion TAM across all game markets. No one else can match our wealth of great franchises or our ability to deliver great games to players anywhere they want to play.

What is so exciting is that we have all the pieces in place as we execute on this strategy, and we have a tremendous opportunity to drive shareholder value, underpinned by the long-term targets we laid out at our Investor Day. We have an enviable and sustainable growth profile, including double-digit growth with a high mix of recurring and digital revenues, a strong balance sheet with a targeted net debt leverage ratio range of 2.5 to 3.5x, $1.4 billion of targeted AEBITDA by 2025, which translates into a targeted CAGR of 15% and a target of approximately $10 billion of capital to be generated by 2025. Our strategic progress on our transformation and results this quarter give me great confidence that we can achieve these targets with our robust product road map and continued execution.

Now turning to quarterly results. Overall, we delivered continued strong results with consolidated revenue growing 5% to $610 million and consolidated AEBITDA of $212 million. Prior year period consolidated revenue and AEBITDA benefited from the $38 million VAT recovery. Excluding the VAT impact, year-over-year consolidated revenue and consolidated AEBITDA growth was 12% and 9%, respectively.

This momentum is the result of the fundamental changes we have made throughout the company and our top-ranked product performance across Gaming, iGaming and SciPlay, like Ultimate Fire Link with its extension Ultimate Fire Link Explosion debuting as the #1 WAP game on Eilers; Coin Combo, a land-based favorite, achieving yet another record launch in iGaming with Hurricane Horse and highly anticipated Carnival Cow and Terrific Tiger set to launch in the second half of the year; and Gold Fish, where Gold Fish Feeding Time drove incremental SciPlay visitation and engagement metrics, which was a hugely successful cross-platform launch.

We have built a leading and unique position in a market that's not only huge and converging but has also been historically resilient to the dynamic economic environment. In fact, current GGR levels remain strong, just as they have during past economic cycles. However, we continue to closely monitor trends and remain proactive, taking steps that have positioned us well to successfully navigate this evolving environment, including proactively implementing measures to offset inflationary pressures, creating a global supply chain and driving operational efficiencies throughout our organization. So we remain confident about our industry and our path forward.

Now let's go deeper into each business unit, starting with Gaming, where our new strategy and product road map are already delivering robust underlying growth. As a reminder here, we had a VAT recovery benefit of $38 million on the top and bottom line in the prior year quarter in the Gaming Ops business. Excluding this benefit, each business line delivered double-digit revenue growth year-over-year.

We achieved tangible success across our 3 largest TAMs: the North American premium gaming ops market, the North American For Sale market and the Australian market. We now have new competitive hardware in each critical segment, setting us up for growth as the market continues to recover and operators ramp their capital budgets.

For example, we recently launched the highly anticipated Kascada Dual Screen cabinet globally, and we saw a strong performance out of the gate in both the U.S. and Australia. We also released the Landmark 7000, a stunning mechanical real machine for the nostalgic slot player. This launch was another huge success with our Blazing 7s franchise titles debuting at #1 and #2 in the Eilers stepper segment. It is also worthwhile to note that the last 2 cabinets we launched are #1 in their categories, with a top ranked game in the latest Eilers report.

When it comes to Gaming, our North Star remains building the best games and enabling platforms. That's why we've ramped our game road map and focused on leveraging our proven evergreen franchises created by some of the best game design talent in the industry. Our strategy is working.

Starting with game ops, this quarter, we saw continued gains with sequential growth in our total North America installed base. Growth was fueled by the eighth consecutive quarter of growth in our premium installed base, resulting in a record premium mix at 43% of our total North America installed base.

I want to highlight Ultimate Fire Link Explosion was recently ranked by Eilers as the #1 WAP game, which we expect to drive growth in the second half of the year. In fact, since its initial launch in 2016, we've released 7 games under the Ultimate Fire Link franchise, and performance is truly exceptional. That's a great example of how we're leveraging our evergreen franchises to grow market share.

Turning to domestic game sales. We saw significant gains as we shipped 4,009 units, up 19% sequentially. And in a sign that the market continues to move toward recovery, we saw replacement units approaching 2019 quarterly run rate levels.

The newly released Huff N' More Puff, which launched on the Kascada Dual Screen, debuted at #1 on the Eilers for-sale list. And we saw additional success from Gold Fish Feeding Time and Rich Little Piggies Hog Wild, all successful extensions of our proven evergreen franchises.

Meanwhile, in Australia, we grew market share on the back of Kascada Dual Screen cabinet and the performance of games like Dragon Unleashed and Huff N' More Puff, which ranked #1 and #3 in Queensland.

Turning to systems. We're continuing to invest in technology that makes us not just market leaders but thought leaders. Our iVIEW 4 continues to drive cashless enablement. And we more than doubled shipments of that hardware sequentially, which is now deployed across 2/3 of the slots in our systems business footprint.

Finally, in tables, we continue to leverage our wealth of experience in IP to maintain our market-leading position. Sequentially, we grew our Shufflers installed base while adding more subscribers to our VALT program, which now stands at over half of our North American customer base.

We're also continuing to invest and drive innovation to grow our ETG business, which we see as a growth segment. We continue to successfully execute on our playbook with growth across all 4 business lines, enabled by a reinvigorated product road map focused on our largest profit pools backed by great design talent.

Let's now turn to iGaming, where our results demonstrate our ability to leverage our unrivaled position in the marketplace, including our original content, unmatched iGaming platform and leading PAM to deliver best-in-class offerings to our partners and players. U.S. revenues increased 47% year-over-year, growth that was driven by GGR scaling as well as continued market share gains.

Our original games underpinned our market share growth in the U.S. If you look at the top 20 games on our iGaming platform, our original content fueled more than 70% of GGR, a testament to the affinity players have for our land-based franchises and digital native games.

We also saw strong performance from our Lightning Box acquisition, which remains the #1 digital native studio on our iGaming platform in the U.S. Creating and leveraging great games continues to be the core of our strategy and our success.

This quarter, we saw the record launch of Coin Combo Hurricane Horse, a top 5 title in the land-based as well as strong performance from games like 88 Fortunes, , Dancing Drums Explosion and Marvelous Mouse. And coming up next is the launch of Carnival Cow and Terrific Tiger, further extensions of our successful Coin Combo franchise.

Turning to international. We saw a sequential rebound in the business, thanks to gains from our evergreen franchises like Rainbow Riches, Rainbow Frenzy and Blazing Hot 7's Big Bonuses. And this quarter also saw us launch in Ontario, our largest ever single market launch.

Finally, we continue to be excited about our Playzido acquisition, where they have strong momentum, having completed over 30 operator integrations since we closed on the deal. And we're seeing strong interest from operators as they look to launch more exclusive content.

Overall, it was a great quarter. And looking forward, our investments in the first half of the year have set us up for continued growth in the second half as we launch more games and in Q4, live dealer.

Let's now turn to SciPlay. We turned in a solid second quarter, outperforming the social casino market both year-over-year and sequentially, along with making good progress towards our expansion into casual. Growth was driven by our major games, with Quick Hit achieving its second consecutive quarterly revenue record, while Jackpot Party delivered one of their top quarters of all time, further validating that SciPlay's scaled evergreen games and sticky cohort base puts them in a great position to achieve their full monetization potential.

Looking ahead, we're seeing momentum in SciPlay's business build in the third quarter, with the launch of a number of new features and tools in their largest games. In fact, July was the second highest revenue month in our history for social casino, second only to our peak revenue month achieved during the height of the COVID pandemic.

Our expansion to casual continued momentum with a successful integration of Alictus, a passionate and talented team that launched a number of new games in the quarter with solid engagement metrics. We see an opportunity to maximize this acquisition by leveraging our expertise and capabilities such as adding new meta features to drive higher LTV.

Additionally, our new casual games portfolio continued to make progress. The newest version of the Solitaire Pets Adventure is in soft launch, and we have some early positive data. Meanwhile Spell Spinner, from our talented team in Finland, remains on track for a soft launch in the fourth quarter.

All in all, SciPlay is a durable, highly cash-generative business. And even as we have delivered significant gains with revenues growing 36% over the past 3 years, we think there's even more upside in the business going forward, fueled by their evergreen franchises, sticky cohorts and disciplined approach to investing and monetizing their players.

One more thing I want to highlight. All the success we're seeing across all 3 business units is enabled by our high-performance culture and top talent, as evidenced recently by bolstering the product and design talent in the Australian market, which was a key catalyst in our share gains this quarter.

We're also pleased to welcome Victor Blanco as our Chief Technology Officer; and Roxane Lukas as our Chief People Capability Officer, both of whom have deep games, technology and digital experience, as we continue to enhance our executive team. Additionally, we appointed Steve Morro as our new Director to our Board effective today. We are fortunate to have Steve, who draws from 35 years as a supplier, operator and regulator in the gaming industry.

To sum up, following another quarter of transformational and operational performance, we have never been better positioned to deliver tremendous value to our shareholders. I've shared some highlights of our organizational and operational progress. And now for more detail on our financial progress this quarter, let me turn it over to Connie.

[Constance James]

Thanks, Barry. For the last 18 months, we've been moving with a sense of urgency to transform our balance sheet, redefine our portfolio businesses and sharpen our focus, all with the goal of becoming a sustainable growth company and driving shareholder value. Before I go into the results, let me take a moment to congratulate our teams on our significant accomplishments.

First, we streamlined the organization with the completion of our Lottery divestiture and paveed the way to expedite the closing on the sale of our Sports Betting business. Second, we moved quickly to delever using the $5.7 billion gross cash proceeds from Lottery to pay down and refinance our debt, enabling us to achieve a net debt leverage ratio of 3.6x.

Third, we returned a significant amount of capital to shareholders, over 4% of our market cap. Fourth, when we laid out our strategy at Investor Day in May, we provided financial targets that underscore the tremendous opportunity ahead. And finally, we continue to drive operational excellence throughout our business, ensuring we drive strong margins.

With our new streamlined organization, we have a strong financial profile with double-digit growth and a radically transformed balance sheet that will serve as the foundation for our future. And I want to thank everyone at Light & Wonder for their contributions in making this happen.

Let's turn to the quarter's financial highlights. Consolidated revenues of $610 million increased 5% year-over-year, as prior year revenue benefited from the $38 million VAT recovery. Excluding this benefit, consolidated revenue grew 12%.

Net loss from continuing operations of $150 million was primarily impacted by $147 million loss on financing transactions associated with the April debt paydown. Importantly, the refinancing will enable us to achieve an estimated annual cash interest savings of over $225 million on a run rate basis, a 47% reduction.

Consolidated AEBITDA was $212 million, a decline of 9% compared to the prior year period, as the prior year benefited from the $38 million VAT recovery. Excluding this benefit, consolidated AEBITDA grew 9%. Our AEBITDA margin from continuing operations was 35%, reflecting a shift in product mix with increased game sales and a doubling of our systems hardware sales sequentially. Additionally, we made investments in key initiatives at iGaming and SciPlay to fuel long-term growth.

I want to note that as it relates to FX, our comp base provides us with a natural hedge. So while we saw adverse movements in FX rates impacting reported revenue growth, albeit immaterial at a consolidated level, it did have a notable impact in iGaming revenues. However, we did not see a corresponding impact on AEBITDA.

Now turning to our business segment results. In Gaming, we delivered strong performance in the quarter. I want to note that last year, gaming operations benefited from the $38 million VAT recovery, which impacted Gaming's revenue and AEBITDA growth rate by 13 and 23 percentage points, respectively. My overview of the Gaming business result will normalize for the benefits in terms of the year-over-year growth rates.

With that, Gaming revenue was up 19% year-over-year with double-digit growth in all 4 business lines. AEBITDA was up 15% year-over-year as we generated a healthy AEBITDA margin of 46% in the quarter, reflective of the products mix as we saw a rise in operator demand for our cabinets and systems hardware.

Gaming operations revenue was up 14% year-over-year driven by momentum in our North American installed base. Our North American premium installed base grew for the eighth consecutive quarter, and revenue per day increased 6% sequentially to approximately $46, exceeding 2019 levels. Growth was driven by the success of our game performance on our Mural and Kascada cabinets, which now represent approximately 30% of our installed base.

Further, game sales revenue grew 23% year-over-year and 19% sequentially, driven by global unit sales of $6,488, up 30% year-over-year and 23% sequentially. ASP was also robust at over $17,000, reinforcing the value we are creating with our reinvigorated product road map.

Our systems business grew 15% year-over-year as we saw a ramp in demand for our iVIEW 4 hardware and an increase in our recurring maintenance revenue. And in table games, we saw revenue increase 29% year-over-year to $44 million, driven by a rebound across all product categories. We couldn't be more pleased with the progress we are seeing across our Gaming business, all which speaks to the success of our new products and the opportunity that lies ahead.

Turning to iGaming. We saw continued momentum in the U.S., and importantly, we made key investments to enable future growth. We generated revenues of $60 million and AEBITDA of $21 million in the quarter. On a constant currency basis, revenue increased 7% year-over-year as growth was primarily driven by record U.S. GGR and share gains in a number of states.

Internationally, while year-over-year results were impacted by regulatory changes, we delivered sequential growth as we benefited from our original content road map. We increased our iGaming AEBITDA margin by approximately 2 percentage points year-over-year while ramping investments in R&D and for the launch of Live Dealer. Overall, we feel great about our unique position in iGaming with our robust original content offering, unrivaled platform and differentiated scale.

Now turning to SciPlay. Revenue grew 4% year-over-year to $160 million and 1% sequentially, benefiting from the acquisition of Alictus, while the core social casino business remains strong, outpacing the market this quarter. SciPlay's continued focus on engagement and monetization allowed them to deliver ARPDAU growth of 3% year-over-year to $0.74 while maintaining a steady DAU base.

Additionally, payer conversion reached a record of 9.4% while average monthly revenue per paying user remained elevated. SciPlay's AEBITDA of $41 million in the quarter was impacted by investments in key growth initiatives, including their SciPlay engine, direct-to-consumer platform as well as a marketing innovation campaign to drive exposure and scale user acquisition, the cost of which spanned Q2 and Q3. We expect AEBITDA margins to scale in Q4 as we see the benefits from these investments and as we move past the marketing innovation campaign.

With its sticky player base, strong monetization and low capital intensity, SciPlay continues to be highly cash-generative. With continuing momentum in the core business and as we invest to build upon our core capabilities, we are enhancing SciPlay's platform and ability to drive sustainable long-term growth.

Moving to the balance sheet, cash flow and capital allocation. With the $5.7 billion of gross cash proceeds from the Lottery sales, we quickly reduced our debt by approximately $4.9 billion, enabling us to report net debt of $3 billion at June 30, a 64% reduction compared to the $8.4 billion at March 31. Our net debt leverage ratio declined from a peak of 10.5x to 3.6x at the end of the second quarter, a truly remarkable transformation from where we were just 18 months ago.

Turning to free cash flow. Results in the second quarter were principally impacted by costs supporting our strategic review, including the divestitures of our Lottery and Sports Betting businesses, which combined are expected to generate approximately $5.6 billion in net after-tax cash proceeds.

Additionally, free cash flow was impacted by increases in working capital and CapEx to meet the growing demand for our products. Looking ahead, third quarter free cash flow will continue to be impacted by the strategic review and transaction costs related to the divestitures, including an approximately $500 million tax payment on the sale of Lottery.

In the fourth quarter, we anticipate tax payments of approximately $235 million related to Lottery and Sports Betting divestitures. We believe free cash flow is one of the key drivers of shareholder value. And in 2023, as we move past the strategic initiatives, free cash flow is expected to improve significantly, translating to substantial free cash flow per share as we benefit from our strong growth profile, the transformation of our balance sheet, the flow-through of operational efficiency benefits and the active purchasing of our shares.

In terms of capital allocation, we continue to take a balanced and opportunistic approach to enhance shareholder value. With our newfound balance sheet strength, one of our key priorities is returning capital to our shareholders. And as Barry mentioned, we purchased $203 million or over 4% of our market cap in just 5 months since authorizing our program on March 1. And at current trading levels, we see purchasing of our shares as an enormous opportunity to create shareholder value.

Wrapping up, I want to emphasize how the swift and transformative capital management steps we have taken position us well to deliver on our strategy and succeed in different economic cycles. As Barry noted, we operate in a resilient industry and today are seeing positive signs with continued elevated GGR.

However, we also remain focused on proactively optimizing our cost base, driving efficiencies across our portfolio. This quarter demonstrated strong operating results, low leverage and significant capital returns, all adding up to a compelling value proposition. We feel great about what we've achieved and the opportunity we have to enhance shareholder value, underscored by a long-term financial target.

With that, we'll turn it over to the operator for your questions.

[Operator]

[Operator Instructions]. Our first question today comes from the line of Barry Jonas from Truist.

[Barry Jonas, Truist Securities]

Can you maybe talk about the kind of visibility you're seeing for over, say, the next 6 months or so for Gaming and other parts of the business? And I guess with that and everything going on, are you seeing any hesitancy as you speak with customers?

[Barry Cottle, CEO, President & Director]

Barry, thanks for your question. Look, I think there's great news here. First, the gaming and mobile game industries have historically been very resilient, and we're seeing that today. We're seeing elevated GGR levels with continued great momentum and actually reinforced by all of our conversations that we've had with numerous operators.

And so we're seeing a -- we have a strong confidence in the market and quite frankly, an even stronger confidence in our ability to take share, given the success and momentum of the games and the robust product road map that we have. So if I break it down and kind of go into each of the groups.

So in Gaming, we had a great quarter, and we saw growth across all 4 gaming business lines, which is, again, a testament to the strong market recovery and also our strong lineup in all the major categories. We now have cabinets in all 4 major slot segments, each with chart-topping gains, which speaks to the breadth and depth of our portfolio. And we have a strong funnel in Q3 and Q4, which gives me even more confidence than ever that we can continue to drive growth.

More broadly, if you look beyond Gaming, we saw continued success in iGaming with share growth in the U.S., which was driven by original game launches. And we have a really strong pipeline of games scheduled for the second half of the year, including 9 land-based titles that we're bringing to market.

And then at SciPlay, as we look into where we are today and in the second half, we're off to a great start. July was actually the second highest revenue month ever in SciPlay, which -- and that's during a summer month, which is not typical. And we had the highest number of payers in the history of the company. So again, if you look across the businesses and into the market, feeling very confident about what we see.

[Constance James]

Yes. And I'd just build on to what Barry said, that one of the beauties about our business is we get real-time data. In fact, I just looked at the Coin in trends this morning from Gaming, and they continue to be elevated across all markets, which I think is just a great sign that business continues to have significant momentum in the backdrop of a strong macro environment in which we're operating at the moment.

To Barry's point, SciPlay, we get daily visibility as well as in iGaming. And both continue to have elevated and strong metrics. So we feel really confident about where the business is headed and our ability to deliver a strong second half.

[Barry Jonas, Truist Securities]

That's great. I appreciate all that color. And then just for a follow-up, it may be early to ask this, but look, it's been about 3 months or so since your Analyst Day. I'm curious as you think about sort of the underlying assumptions and those targets you outlined, if anything's changed from your perspective? That could be composition, timing or maybe just the shape to get to some of your targets?

[Barry Cottle, CEO, President & Director]

Absolutely. Thanks, Barry. Look, Investor Day was a great momentum for us to share our strategy and also introduce folks to the people in our organization that are driving these initiatives. And based off the performance of the business this quarter and the progress that we've made on our strategic initiatives, we're actually highly confident today in our ability to achieve the targets we set during our Investor Day.

And we obviously can't predict the macro environment. But as I mentioned in the last -- as we just talked about the next 6 months, we know the game sector is resilient and that the industry is showing great momentum today. And we have an unmatched position.

We have an amazing portfolio of assets with leading positions across all 3 markets: gaming, iGaming and social. And our confidence in our people, playbook and the product road map that we shared that day, quite frankly, it's only gotten stronger as evidenced in this quarter.

[Constance James]

And I might just add one additional thing here, that we're really pleased with the significant and swift progress that we've made on executing the capital management priorities we outlined at Investor Day, which were debt reduction, share repurchasing and investing for growth. In the quarter, you would have seen that in relation to our debt reduction, we made significant progress with the $5.7 billion of proceeds we received in April paying down our debt refinancing, which resulted in this 3.6x net debt leverage ratio. And it puts us well on our way to achieving the 2.5x to 3.5x range that we outlined.

Additionally, we've made significant progress on our share repurchase program, which is a key pillar of our capital management. Barry mentioned in the prepared remarks that we've executed already 27% of that $750 million program in just 5 short months.

And as we continue to move forward past the divestiture, we will have the opportunity to generate significant cash flow, which, again, we see as just a tremendous opportunity to drive shareholder value. So the operational momentum we see in the business and all of the competitive advantage plus the momentum that we've already driven in terms of capital management, we feel really good about our ability to achieve those targets.

[Operator]

The next question today comes from the line of David Katz from Jefferies.

[David Katz, Jefferies]

Number one, I wanted to just talk about SciPlay for a moment and if you could just discuss for us, I mean, it grew a little bit. But just talk about what -- in qualitative terms, what this might look like, say, the next 12 months, 24 months and as you build towards those targets, right? I mean, there is growth, but it was relatively small. I assume that's going to accelerate over time. And just a little more detail would be helpful, please.

[Barry Cottle, CEO, President & Director]

Yes, absolutely, David. And thank you for your question. So stepping back, if you look at SciPlay, SciPlay is a -- has grown 36% over the last 3 years. And as you alluded to, there's obviously some natural normalization post COVID and adapting to some things in the environment. But we continue to outpace the market in the social casino space, and there's actually tremendous upside in the $70 billion TAM business today.

And if I can -- I'm going to just pick out one piece of it just to kind of demonstrate that upside. We see tremendous upside to monetize our players. Remember, SciPlay is an evergreen -- a portfolio of evergreen games with sticky cohorts, where the cohorts grow in value over time.

And if you look at the -- over the last -- since 2019, we've grown ARPDAU by a little over 50% since 2019. And breaking that down, there was a -- we call Project All-Star that we implemented in our largest games that has driven that ARPDAU in a subset of these games. And as we broaden that program across the entire portfolio, we have a high level of confidence that we can drive further monetization because it's important to note that SciPlay's monetization, while it has grown and is incredibly healthy, is still roughly half its top peers.

So there's tremendous upside in SciPlay in this space to improve monetization and improve growth and drive market share consistent with that. So we continue to see payoffs from its investments in these growth initiatives, leveraging the SciPlay engine, centralizing the learnings from Project All-Star, which is going to just, again, continue to drive the engagement and monetization of this evergreen base. And so when you layer on that with the continued diversification in new games that we're launching in casual, there's tremendous upside for SciPlay. We're very confident in our ability to grow that business.

[David Katz, Jefferies]

Understood. And my follow-up is really around the number of people you added, some of whom you called out in your prepared remarks. Do you feel like you have all of the sort of human capital in place to do what you need to do? Or should we be thinking about more hiring and more additions as you go?

[Barry Cottle, CEO, President & Director]

Absolutely. Great question. I'll start by saying is I think we've never been in a better position from a strategy, talent and balance sheet perspective than we are today. So kind of regardless of whatever capital that you referred to, I think we're just an amazing place.

From a strategy perspective, I -- our goal is to become the leading cross-platform global game company. And I think we have all the major pieces in place to do that and making great progress. And as I've mentioned, I think a few times before, at least around -- under the roof here that great people do great things.

And since I took this role, my #1 priority has been to recruit the best talent capital in the industry and create a high-performance culture to win. We introduced a lot of those folks at Investor Day. I think we've mentioned the figure of over 25 key folks being brought in just in the gaming space alone.

But we've done this. We've gathered the world's greatest gaming, iGaming and social casino talent along with an amazing team of game designers. We just recently announced the addition of Roxane Lukas and Victor Blanco. And so I can say we -- we've been extremely successful in putting great people in place in this business.

But to answer the second part of your question, I can also tell you that this will never stop being our #1 priority. You can never have enough great people, never have enough great designers. And so we will always lean in on that, because that's what makes us great.

[Operator]

The next question today comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group.

[Ryan Sigdahl, Craig-Hallum]

Barry, Connie. I want to start in gaming. So it seems like you have a lot of good things building with the team, the cabinets, the content. When we look at kind of market share relative to peers, you guys are growing kind of with the industry more or less. I guess talk through kind of how this product, everything is building internally and when maybe we can start to see some acceleration on the market share from a reported numbers standpoint?

[Barry Cottle, CEO, President & Director]

Absolutely, Ryan. Great question. Here's how I would describe it. So I think, yes, in fact, I think we've made significant progress over the past 2 years. If you remember, setting out our strategy or playbook to focus first on the largest profit pools in terms of prioritization. And at the top of that list was North America premium segment, which was our biggest priority. And we drove 8 consecutive quarters of meaningful growth or 14% year-over-year just in this past quarter.

But we grew that, if you remember, bringing on the team and the playbook and our road map 2 years ago. We've been building our portfolio and our road map while growing this business. And so we have now -- we started out, if you look at the last 2 years, you have Mural and Kascada that were introduced early on. And just recently, the Landmark 7000 and Kascada Dual cabinet, and I think all with chart-topping hits the last 3 cabinets that we launched #1 titles with them.

And so for the first time, we now have a complete portfolio in all 4 critical segments backed by chart-topping hits. And so while we are extremely proud of the progress we made in the market while building the road map, we now have a full team, the best design team we've ever had.

We've got the best portfolio we've ever had. And we have such an amazing road map as we look out over the next 6 to 24 months, that we feel great about our ability to drive meaningful growth in the game ops footprint going forward.

[Constance James]

Yes. And I might just build, Ryan -- great to be with you -- on that, which is to Barry's point, I think we're seeing a lot of success in the replacement market with the products like Mural. But as we launch into Stepper here, which, again, that cabinet is just off to a phenomenal start. I think we've seen some performance that we're performing over 4x house average, which is just phenomenal. And as we continue to penetrate the dual screen segment, we know that, that's another catalyst for growth.

Additionally, I'd say that as we look forward, we're going to start to expand into some of these ancillary markets, which we haven't had the opportunity to do just yet. As Barry mentioned, we're continuing to expand the portfolio.

But in the beginning, it was really important that we win in the largest opportunities, which was kind of that core replacement in new openings and expansion. So we feel really good about where we're headed. If you looked at the recent Eilers report, you would have seen a number of our games popping straight to the top of the chart, which gives us a lot of confidence in our ability to continue to take share.

[Ryan Sigdahl, Craig-Hallum]

Great. Maybe one more quick one for you, Connie. Just can you clarify on the buyback, if I look at what you reported last quarter in Q1 is $140 million, $203 million, it implies kind of a deceleration there. But anything to be aware of, I guess, from a blackout period or anything in the quarter, given it sounds like you have a lot of confidence in where the stock is here to be buying stock as fast as you can?

[Constance James]

Yes. Great. Thanks. First, I'd say we're incredibly pleased with the progress that we've been making in terms of our share repurchasing program. We outlined a $750 million program. We've already executed about 27% of that.

You're absolutely right. Where our share price is today, we see tremendous value that we can create by continuing to repurchase our shares, and that will be something that we continue to execute on.

In terms of our ability and the pace in which we've been moving, there was an element in the quarter given the change in the sports deal that required us to pause for a moment because we were -- we had some material nonpublic information. But what I can tell you is that we will be back into the market.

We see, again, tremendous opportunity to drive shareholder value. And at the pace in which we've already proceeded, we're going to likely complete that 3-year program much quicker than originally outlined.

And I'd just say, in general, that as we move forward, we know that our business is going to generate significant cash and we see free cash flow per share as a key metric. And so the combination of the business that we've now created, coupled with our share repurchase program, we just see tremendous opportunity again to create shareholder value.

[Operator]

The final question today comes from the line of Jeff Stantial from Stifel.

[Jeffrey Stantial, Stifel, Nicolaus & Company]

Great. I wanted to start on the core land-based business. Just curious what you're hearing from your customers regarding capital budgets for table games and systems starting to pick back up, accelerate into the back half of the year. Just given that the slot replacement cycle has been approaching 2019 levels for the past couple of quarters or so, are you starting to see signs of an accelerating recovery in Systems and in Tables? Or just how should we think about the lag for those 2 businesses relative to the momentum we've been seeing in Slots?

[Barry Cottle, CEO, President & Director]

Yes, great question. And again, I think the great news here is we saw strong growth in both businesses, in fact, the entire portfolio. And as you alluded to, those 2 segments were the slowest to recover post COVID.

And with the momentum we've now realized, and as you said, the conversations that we've been having with operators, and we've seen and experienced that increase in CapEx. By the way, you saw it in game sales, too, with sequential 19% quarter-on-quarter. You see it here on the table side of the business with the increase in Shufflers increase in our 50% -- over now -- over 50% subscription on VALT. And you're seeing the system business with we've had a real increase in demand on the iVIEW 4.

And so it speaks, I think, to the confidence in the momentum in the GGR, then the player demand and the operators' confidence in the market going forward. And so where it came early in game ops and then to game sales, it's -- we're now seeing that confidence in that across all 4 of our business lines in gaming.

So as you know, we have a leadership position in both of those. And so we benefit even more so in this category. And so we have -- we're very happy with it. We have amazing strength and position in both segments. And we're excited to see this momentum and from the conversations we have, we believe they'll continue.

[Constance James]

Yes.

[Jeffrey Stantial, Stifel, Nicolaus & Company]

Great. That's very helpful. Oh, sorry. Go for it, Connie.

[Constance James]

No, I was just going to say, just building on what Barry said, the exciting news, I think what you're hearing perhaps as just a broader thread is, we've been really bullish on seeing a full market recovery by 2023. And we've got a lot of momentum in the business.

And I think that as you're thinking about systems and tables, those kind of go into this camp in terms of an overall gaming recovery. So again, we are optimistic that market recovery continues to kind of fully rebound by 2023.

[Jeffrey Stantial, Stifel, Nicolaus & Company]

Great. That's very helpful color. And then for my follow-up, moving to the margin side of the equation. Just curious what you're seeing more recently on the supply chain front.

Are you seeing any relief in logistics costs, given we're tracking on improving freight spot rates? And just how are your lead times trending more recently relative to earlier this year, call it Q1? And kind of how is that relative to your average in 2019?

[Constance James]

Sure. Absolutely. I'd start with first that I think we are navigating the supply chain environment incredibly well. I think that's evidenced just by the performance we've had through the first half of the year, in particular our ability just to fulfill the growing demand. It's great to see both the market recovery and our ability again to fulfill that.

We've been really proactive in supply chain. You've probably heard me a couple of times say that one of the operational efficiencies that we first stood up in the business was actually creating a global supply chain. And that's allowed us to do a couple of things.

One is I'd say we've got better visibility than we've ever had into the depth of supply chain in terms of Tier 2 and Tier 3 suppliers. And we really leaned into a dual sourcing strategy that's provided 2 benefits.

One, it's obviously given us a level of diversification in terms of suppliers. But it's also allowed us to put some price competitiveness in terms of those various suppliers, which allowed us to drive significant savings, which, to your point, has helped us to offset increasing freight as well as some of those costs associated with spot buys.

So all in all, we're seeing margins from a product perspective very, very healthy, given those proactive steps that we took. You would have seen, I would call out a little bit of softness in the margin in gaming, but that was really more driven by a mix issue than anything else in terms of the hardware sales coming through from the games business as well as the iVIEW 4. So overall, I'd say product margins remain very healthy. Over time as supply chains normalize, we should really start to see some of those benefits in terms of operational efficiency dropping to the bottom line.

[James Bombassei, SVP, IR]

Appreciate it. Now I'll turn it over to Barry for some final comments.

[Barry Cottle, CEO, President & Director]

Thanks, Jim. This has been a pivotal year for our company, and we had tremendous success this quarter. We believe that there's no better time to be in this industry, and nobody is better positioned to take advantage of the $70 billion TAM games market opportunity.

We are uniquely positioned to capitalize on the opportunities ahead with unmatched assets and market leadership, a clear vision and road map and unparalleled competitive advantages to take market share, drive cash flow and ultimately generate significant long-term value. We couldn't be more excited about the future and the path we are on to generate significant returns for our shareholders. Thank you.

[James Bombassei, SVP, IR]

We want to thank everyone for joining our earnings call. And now I'll turn it back over to the operator.

[Operator]

Thank you. That concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.