Light & Wonder Inc

NASDAQ:LNW

Earnings Call Analysis

Light & Wonder Achieves Record Revenue in Q4

Light & Wonder reported a strong end to 2023 with record revenues, significant growth in key metrics, and strategic achievements. Q4 consolidated revenue grew 13% year-over-year to $770 million, and full-year revenue rose 16% to $2.9 billion, driven by double-digit growth across all businesses. Operating income increased by 57% in Q4 to $155 million and by 90% for the year. Adjusted EBITDA grew 14% to $302 million for the quarter and 22% to $1.1 billion for the year, reflecting operational efficiencies and growth momentum in the U.S. and international markets. Notably, average monthly revenue per user reached $114, and average revenue per daily active user grew 15%, both record highs. The iGaming sector saw 13% revenue growth with a $70 million quarterly high, emphasizing their content strength and expansion. The company's product and marketing strategies are set to maintain momentum in 2024, buoyed by expansion into new markets and legislative progress in regions like Brazil. Additionally, the successful completion of the SciPlay acquisition and the secondary listing on the ASX further positions the company for global growth and investor attraction.

Light & Wonder's Banner Year with Robust Growth Across Three Business Segments

Light & Wonder has had a banner year in 2023, delivering a strong business and financial foundation with continued momentum. This includes an impressive 13% increase in consolidated revenue over the fourth quarter of the previous year, and for 11 consecutive quarters, the company has experienced year-over-year growth. Notably, all three business segments have achieved five consecutive quarters of double-digit revenue growth, culminating in a 16% increase in consolidated revenue, reaching a new high of $2.9 billion for the year.

Strategic Focus on Franchise Extensions and Market Share Gains

Capitalizing on franchise extensions such as Dragon Train, which has been successful in Australia and is anticipated to be well-received in North America, Light & Wonder has achieved impressive market share gains. The company expects to be active in video lottery terminal markets, like Oregon and Quebec, as well as in the coin operated amusement machine market and historical horse racing markets in 2024. It highlights a strategic shift from exploring new niche markets to bolstering existing franchises that offer utility across the company's ecosystem and drive revenue growth.

Investment in R&D and Product Offerings Fuel Financial Stability

Light & Wonder's improved financial position and disciplined capital allocation have allowed it to continue investments in the future of the company, with a commitment to accelerating research and development (R&D) as well as enhancing the product offering. These strategies support the growth of the company's digital and iGaming business segments, which have been significant growth drivers, as well as the social casino space where SciPlay recorded another record quarter.

Gaming Segment Driving Progress with Enhanced Game Performance

The gaming sector continues to be strong for Light & Wonder, achieving 13% top line growth for the quarter and 16% for the full year. This success is manifest in the 590 unit increase or 2% growth in the North American installed base year-over-year. The company has focused its gaming strategy on fleet optimization and game development to create casino floor staples, and on building evergreen franchise extensions like Ultimate Fire Link, Huff N' Puff, and Dancing Drums.

Record Game Sales and Market Leadership with Next-Gen Cabinets

In-game sales, Light & Wonder's strategic approach was validated with over 37,000 units shipped globally for the year, marking a company record and a 40% increase from the previous year. Continued growth in North America and Australia, maintaining over 20% market share, is anticipated, particularly with the introduction of the KASCADA series cabinet. These cabinets and licensed titles like Monster and Squid Game are expected to propel the company into 2024, reinforcing Light & Wonder's market leadership and customer engagement.

Systems Innovations Drive Contract Wins and Customer Engagement

Recent systems deal announcements, such as those with Harry Reid International Airport and Mohegan INSPIRE Entertainment Resort, showcase Light & Wonder's reputation as the operator's preferred choice. The company's systems offerings, highlighted at the Global Gaming Expo, include features like cashless operations which are gaining traction in trials such as those in New South Wales for responsible gaming initiatives. These advancements are expected to maintain Light & Wonder's leadership in the market through innovation and comprehensive portfolios.

Table Products Contribute to Recurring Revenue Stream Expansion

The global market recovery has prompted higher sales for Light & Wonder's table product line, with a 13% revenue increase. This success underpins the company's aim to expand recurring revenue streams and target long-term growth. Product innovation and hardware investments will play a crucial role in this expansion, as Light & Wonder takes advantage of its extensive library of intellectual property and reputation for best-in-class products.

SciPlay's Breakout Year and Integration Success with Cross-Platform Strategy

SciPlay has become a fully integrated part of Light & Wonder's portfolio, leading to a breakout year. The smooth integration and execution of a cross-platform strategy have resulted in a substantial uptick in market share for 8 consecutive quarters. SciPlay increased its revenue by 12% in the quarter and 16% for the year, hitting record levels. Its largest games have contributed to its success, driving the vision for continued digital revenue enhancement through strategies like Live Ops.

Earnings Call Transcript 2023-Q4

[Operator]

Hello all, and welcome to the Light & Wonder 2023 Fourth Quarter Earnings Conference Call.[Operator Instructions] I'll now turn the call over to Nick Zangari, Senior Vice President of Investor Relations. Please go ahead.

[Nick Zangari, executive]

Thank you, operator, and good afternoon, everyone. Welcome to the Fourth Quarter and Full Year 2023 Earnings Conference Call. With me today are Matt Wilson, our President and CEO; and Oliver Chow, our CFO. During today's call, we will discuss our fourth quarter and full year 2023 results and operating performance, followed by a question-and-answer session.Today's call will contain certain forward-looking statements that may involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call. For information regarding these risks and uncertainties, please refer to our earnings materials relating to this call posted on our website and our filings with the SEC.We will also discuss certain non-GAAP financial measures. A description of each non-GAAP measure and 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 of our website.In 2022, we completed the sale of the Lottery business to Brookfield Business Partners in the second quarter and the sale of the Sports Betting business to Endeavor in the third quarter. Accordingly, we have reflected these businesses as discontinued operations in our consolidated statements of operations for comparable prior periods.We are reporting our results of continuing operations in 3 business segments; Gaming, SciPlay and iGaming. Amounts and disclosures referring to combined include both our continuing and discontinued operations.As a reminder, this conference call is being recorded. A replay of this webcast and accompanying material will be archived in the Investors section of our website.With that, I will now turn the call over to Matt.

[Matthew Wilson, executive]

Thank you, Nick, and thanks, everyone, for joining today's call. Our fourth quarter performance capped off a banner year for Light & Wonder as we continue to build upon our strong business and financial foundation. Notably, we have consistently delivered on our key performance objectives since we announced the company's transformation strategy.Our numbers reflect strong execution and continued momentum, with consolidated revenue up 13% over the fourth quarter of last year, marking 11 consecutive quarters of year-over-year growth. We once again delivered double-digit growth across the board, as evidenced by our results throughout the year, and have now achieved 5 consecutive quarters of double-digit revenue growth in all 3 businesses. As a result, we ended the year with a 16% increase in consolidated revenue, reaching a record $2.9 billion for 2023.Looking back, I would like to share with you what defined Light & Wonder and drove our success this past year. We have an exceptional team and experienced leadership with a winning mentality. I firmly believe that we have the best-in-class talent executing on a proven playbook, and I commend our entire team for an outstanding quarter and an outstanding year. Throughout 2023, we made strategic investments in the aspects of our business that we expect to drive long-term sustainable value, something we were not able to do before the transformation.Our improved financial position and disciplined capital allocation strategy support our ability to continue to invest in the future of Light & Wonder, with a commitment to accelerating R&D investments and enhancing our product offering. We have a differentiated product strategy and demonstrated sound execution on our growth pillars, with refreshed hardware and content for both core and adjacent markets.We achieved impressive share gains in key markets with the popular franchise Dragon Train continuing to drive our growth in Australia and creating notable operator engagement around our pending release in North America. We also made considerable progress in adjacencies and we expect to be active in video lottery terminal markets, notably Oregon and Quebec, where we've recently announced deals as well as the coin operated amusement machine market and historical horse racing markets in 2024.Capitalizing on franchise extension has been another key differentiator in driving our success. We have shifted our focus from allocating the majority of our resources to new niche markets coming online to now building on our evergreen franchises and game extensions, which can be leveraged across our entire ecosystem.In our digital businesses, SciPlay had another record quarter with continued market share momentum and higher revenue in the social casino space, which we will discuss in further detail. Our iGaming business segment continued to be a growth driver for Light & Wonder with a strong quarter reflecting continued momentum in both the U.S. and international markets.These results demonstrate the benefit of our robust R&D strategy, driving improved game performance with impressive returns on our investments. We continue to see iGaming as compelling opportunities as this market continues to develop over the coming years. For Light & Wonder, it truly is all about the game. Throughout the past year, we executed on our product strategy to build exciting industry-leading games that have continued to drive our impressive performance metrics.In addition, we are pleased with our continued progress on our cross-platform strategy with development efficiencies being realized and content expansion across all channels driving digital revenue uplift. We are very pleased with our considerable progress across our business units as we continue to capitalize on the opportunities in a resilient gaming industry.I will now turn to our business unit operational highlights. Gaming continues to be a strong driver for Light & Wonder. Our investments are bearing fruit as we delivered on strong top line growth, up 13% for the quarter and 16% for the full year. We saw continued momentum in gaming operations, ending the year with an increase of 590 units or 2% growth in our North American installed base year-over-year.These results were largely driven by premium units, which continued to increase for 14 consecutive quarters. The performance of our games is on full display, with both North America and international revenue per day exceeding 2022 levels in the quarter and for the year. This is a testament to our strategy, focusing on fleet optimization and ensuring the games we develop are casino floor mainstays, maximizing the full value of each and every unit we deploy onto the casino floors.We will continue to build on our evergreen franchise extensions, such as Ultimate Fire Link, Huff N' Puff, Dancing Drums, and recently, Dragon Train, which was the biggest Australian launch in the Company's history.Our licensed titles, such as top-performing Monster and highly anticipated Squid Game featured on our highly successful COSMIC and new large-screen jumbo Horizon cabinets are expected to extend our momentum heading into 2024, providing immersive and seamless player experiences.In game sales, our strategy was validated by an outstanding performance with over 37,000 units shipped globally for the year, a company record, and an increase of 40% compared to the prior year. Our progress in both North America and Australia is evident as we continue to maintain over 20% market share in both markets with exceptional growth in the replacement segment year-over-year. We expect continued growth with our KASCADA series cabinet, notably the KASCADA dual screen, which was named top performing new premium cabinet at Eilers and the driver of our announced deals into Oregon and more recently Loto-Quebec.Moving on to systems. Highlights for 2023 included key contract wins driven by our product portfolio with enhanced capabilities such as loyalty features, giving operators access to greater insight on player preferences. Our recent systems deal announcement with Harry Reid International Airport and Mohegan INSPIRE Entertainment Resort in Korea fully demonstrates why we are the preferred choice for operators, providing an intuitive, curated customer journey at every touch point regardless of location, vertical or platform.Our Engage product continues to gain traction as we focus on software services in addition to our in-demand hardware. We're excited by the offerings that we highlighted at the Global Gaming Expo, such as cashless, which is currently gaining traction, including in Australia, as we participate in trials in New South Wales for responsible gaming initiatives. We expect Light & Wonder to maintain its leadership position in this space through innovation and partnership with our operator customers to bring the most comprehensive portfolios to the market.On to Tables, we continue to be an industry leader known for best-in-class products and an extensive library of IP. The recovery in the global markets helped drive higher sales with table product revenue up 13%. Overall, we expect to expand on our recurring revenue streams and target long-term growth through product innovation and hardware investment where we have a proven track record of success.To sum it up, I'm very pleased with our performance in gaming. Light & Wonder is still in the early innings of growth in this sector. Importantly, we are well positioned in every product category with our [ framing ] offerings and a focused strategy to capitalize on new opportunities across this important segment.Now, turning to SciPlay. We continue to be pleased with our performance in the social casino space. SciPlay is now a fully integrated part of our portfolio, executing beyond expectations in a breakout year.First, I'd like to share that the integration has gone well and we are executing on our cross-platform strategy through a more harmonized development process across all businesses. Last year, I highlighted our key growth objectives for SciPlay; outpacing the social casino market, scaling average revenue per daily active user and investing in both our SciPlay engine and product road map.I'm very pleased that we have delivered on these objectives, reflecting both strong leadership and consistent execution. We outpaced the market again now for 8 consecutive quarters and have consistently gained share over the course of the year. SciPlay grew revenue 12% in the quarter and 16% for the year, both record levels. Our 4 largest games, Jackpot Party, Quick Hit Slots, Gold Fish Casino and 88 Fortunes posted quarterly record revenues, a testament to the success of our SciPlay engine as we continue to enhance our portfolio of games through our Live Ops strategy.Our recent Dancing Drums [ app ] launch was also a success as we continue to expand our land-based titles on our social platform. Average monthly revenue per paying user was approximately $114 and average revenue per daily active user increased 15% year-over-year to $1, both record levels in the quarter. We will continue to invest in our capabilities and product road map to drive engagement and loyalty, while continuing to grow monetization sustainably and responsibly, particularly in our core franchises.Entering the new year, we are focused on developing our direct-to-consumer platform, which we expect will enhance player relationships and engagement, accelerate the potential to expand margins over the long term and grow lifetime player value. Clearly, SciPlay continues to be a valuable growth driver for Light & Wonder and a big part of our overall strategy. Going forward, we look to extend our industry-leading social casino growth as we further differentiate our offerings from those of our peers.Now, looking at iGaming, our portfolio expansion enables us to be one of the largest content providers in the industry, and we continue to see tremendous demand from operators and from players. Quarterly revenue increased 13% year-over-year to a record $70 million, with full year revenue also a record, reflecting the continued growth momentum in the U.S. and international markets. The growth is a testament to our best-in-class content aggregation platform and unmatched first-party content.The quarter was highlighted by record launches with Pirots 2 and Ultimate Fire Link Cash Falls - China Street, further demonstrating our content development road map and our cross-platform approach. Of the Top 20 games on the OGS across the U.S., our third-party content accounts for over 2/3 of the total, driven by land-based titles, table games and Lightning Box.In addition, Elk, Lightning Box and Playzido, all continue to scale with record GGR in the quarter. We are collaborating closely with operators on our live casino offering, which went live in the quarter in Michigan with Rush Street, Golden Nugget and DraftKing. The initial feedback has been very positive with teams working together on both sides as we continue to enhance our product with additional functionality.Importantly, other operators have taken note of our collaborative partnerships and I'm pleased to announce that we signed an agreement with Penn Entertainment for Michigan, which will include network and bespoke tables. While we are still in early stages, we are already in discussions with customers on expansion opportunities into other regions. Over the long term, we expect this to be a growth driver for our iGaming business.The U.S. is a fast-growing market, and we will continue to drive our key initiatives, which are to execute on the launch of 2 epic land-based titles plus 1 digital native title monthly, expand jackpots, steppers and table game offerings with our IP and scale and accelerate Elk Studios launches and game services such as marketing jackpots and multiplayer features, all while focusing on game placement and promotion.As we look to 2024, we expect to extend our momentum through our regionalized road map and original content that have already brought us great success to-date as well as further expansion into new markets. We are encouraged by the legislative progress in Brazil, confirming our optimism for the future of iGaming legislation as a growth driver for Light & Wonder. Our portfolio expansion and legalization will drive future growth. And our impressive scale, robust product offering and well-established footprint globally positions us well to execute when opportunities arise.We are very proud of our accomplishments in 2023 as we executed on a number of key strategic initiatives. Our successful secondary listing on the Australian Securities Exchange or ASX further expanded our global presence in May. Subsequently, we were added to the ASX 200 Index last October. This inclusion enables Light & Wonder's exposure to a broader base of investors, further solidifying our position in the Australian capital markets. Notably, feedback to-date from the Australian investor community continues to exceed our expectations.As we previously mentioned, we closed the SciPlay acquisition in October as well, with integration completed successfully and collaboration on our cross-platform opportunity accelerating. Finally, we continue to strategically increase our investment in the business and return capital to shareholders, all while improving our cash conversion and further reducing leverage. I'm also pleased to report that Light & Wonder's strong performance did not go unnoticed as we garnered several distinguished industry awards this past year.As a testament to the success of our cross-platform strategy, we were named as the Multi-Channel Supplier of the Year at the International Gaming Awards. We were also named Full Service Platform Provider of the Year at the EGR North American Awards, fully demonstrating the power of our well-run portfolio. Our business unit leadership and teams all received accolades at the SBC Awards in North America. Notably, SciPlay was named Social Casino Operator of the Year on the back of a banner year.Our momentum internationally was also recognized as we were named Casino Supplier of the Year at the Global Gaming Awards in Asia and most recently at ICE in London as well. Additionally, we were acknowledged for our CSR and ESG efforts by being named the Diverse and Inclusive Team at the Women in Gaming Diversity Awards. As part of our recent transformation, we have also strengthened our commitment to be a positive influence on the industry, driving key social initiatives that are core to our values.Our primary focus on responsible gaming as an industry leader drives us to create products and services that can be enjoyed responsibly across the globe, as evidenced with our Cashless collaboration with peers and regulatory organizations in Australia. Responsibility starts with us, and we will continue to educate our employees on awareness of responsible gaming policies and practices. Our corporate and social responsibility programs as well as our environmental, social and governance efforts will continue to be a top priority for Light & Wonder.To sum it up, we expect continued execution of our strategy in 2024. The results we delivered in 2023, along with our ability to attract best-in-class talent, established market positions and strong cross-platform capabilities put us on a clear path to achieve our long-range targets. Our teams have done a tremendous job and Light & Wonder is shining brighter than ever. We are ready to deliver on the promise of sustainable growth as we continue to be the leading cross-platform global games company.As you know, in December of last year, Oliver Chow was officially named the company's Executive Vice President and CFO. I am delighted to officially welcome Oliver to our senior leadership team. He has already played a pivotal role in driving the success of the transformation, and I'm confident that we will benefit from his expertise and financial guidance as we continue to execute on our strategy.And with that, I'll turn it over to Oliver.

[Oliver Chow, executive]

Thanks, Matt. These are exciting times for the industry and the company, and I'm honored to be part of it as CFO of Light & Wonder. It is my mission to build on our solid financial foundation, leveraging our highly cash-generative business with a continued focus on operational excellence. I appreciate the confidence that our global investor base has placed in us and I take my role as a steward of investor capital very seriously. That said, I look forward to working with all of you moving forward.Turning to our operating performance. We were able to capitalize on many of the opportunities presented to us in 2023 and delivered strong top and bottom line growth, both in the quarter and for the full year. For the fourth quarter, consolidated revenue increased 13% year-over-year to $770 million. Full year consolidated revenue was up 16% to $2.9 billion, a new record for Light & Wonder. Our results were, again, driven by double-digit growth across all of our businesses.Operating income was $155 million in the quarter, an increase of 57% over the prior year period, primarily on strong top line growth, lower D&A and restructuring and other costs. Full year operating income was $518 million, a 90% increase compared to the prior year.Consolidated AEBITDA grew 14% to $302 million in the fourth quarter compared to the prior year period, primarily driven by double-digit top line growth and maintaining strong margins across all of our businesses. We grew 2023 consolidated AEBITDA 22% to over $1.1 billion, a tremendous outcome reflecting the hard work of our talented team and the continued upward trajectory of our financial performance.Consolidated AEBITDA margin was 39% for the quarter and the year. We saw a 300 basis point increase over 2022 margin levels for the year, with all 3 business units over 200 basis points higher, executing with a continued focus on operational efficiencies.Adjusted NPATA was $109 million for the quarter and $388 million for the year. As a reminder, this metric is not comparable to the prior year period due to the materially different debt and tax profile of the company, prior to the completion of the divestitures.Consolidated operating cash flow was $167 million in the quarter. Comparability is not meaningful as the prior year period included $176 million of cash tax payments related to the divestitures. Full year consolidated operating cash flow was $590 million, up compared to prior year, primarily due to cash taxes paid related to the divestitures, which were $32 million in the current year and $641 million in the prior year as well as lower interest payments.Turning to the business units. In Gaming, we continue to execute against our KPIs, delivering exceptional financial performance, supported by our strong product portfolio and proven market strategy. Revenue in the quarter grew 13% year-over-year to $496 million and AEBITDA increased to $245 million, a 14% increase compared to the prior year period. This impressive revenue growth was led by robust North American and international game sales in the quarter, which increased 31% year-over-year, with profitability primarily driven by revenue growth in the period.Full year revenue grew by 16% to $1.85 billion and AEBITDA by 20% to $918 million, with solid growth across all business units. AEBITDA margin was 49% in the quarter and 50% for the year, as we trend in line against historical levels, which we expect to sustain given continued execution on our margin enhancement initiatives over the long run.Gaming operations revenue in the quarter increased 7% year-over-year, primarily driven by growth in our North American installed base and revenue per day. Our premium North American installed base grew 7% year-over-year. Revenue per day in the quarter grew 6% in North America and 16% in international compared to the prior year, driven by the performance of our premium games and as we continue to optimize our fleet.Global game sales were robust in the quarter, with revenues up 19% sequentially and 31% year-over-year. In addition to the continued momentum in the North American replacement market, we also had a large replacement sale of over 3,700 units into the U.K., which affected average selling price in the quarter. We expect this ASP dynamic to continue as we enter into the adjacent markets more meaningfully in 2024.On to Systems, where we continue to expand on recurring revenue stream and higher service and maintenance revenue in the quarter. To note, there was a sizable hardware sale for a new property in Asia in the prior year, which affected comparability. Lastly, tables revenue was flat compared to the prior year, primarily due to the timing of product sales, which resulted in a stronger third quarter this year.Looking ahead over the next several years, we expect to expand on the higher margin and recurring revenue segments of the gaming business over time, and we expect 2024 to be another year of robust sales, underpinned by innovation and investment in our product portfolio.Turning to SciPlay. We, once again, delivered record fourth quarter and full year performance, outpacing the social casino market and gaining market share on solid execution against our ROI metrics. Revenue in the quarter was up 12% year-over-year to $204 million on higher monetization, leveraging game content, dynamic live ops and effective marketing strategies, with Quick Hit, Gold Fish Casino and 88 Fortunes all delivering significant double-digit gains on record revenue. AEBITDA increased 17% to $69 million year-over-year, with AEBITDA margins up 200 basis points to 34%.Full year revenue was $777 million, up 16%, and AEBITDA was $243 million, up 30%, both were the highest in SciPlay history. SciPlay's investment in talent and core capabilities has driven significant uplift across key monetization metrics. We saw record average revenue per daily active user increase 15% to $1 and record average monthly revenue per paying user increase 15% to over $113 compared to the prior year quarter.Our daily active users and monthly paying users both remain steady, and payer conversion rate continues to reach quarterly new heights at 10.7%. Prudent and diligent marketing and UA spend is reflective of SciPlay and more broadly, Light & Wonder's DNA. Every decision is carefully considered prior to execution.The margin expansion we saw over the past several quarters is a great example of the health of the SciPlay business. Based on our marketing return analysis, we have identified a number of UA investment opportunities throughout 2024, notably in the first half, such as the new Joel McHale campaign we launched in the current quarter, along with expansion and innovation costs, as we look to grow in nascent markets and develop new games. Our margins will fluctuate in the near term with these investments, all of which is expected to fuel long-term sustainable growth.We applaud the success SciPlay achieved this year and the incredible level of execution we're seeing across the portfolio. This gives us confidence in further development of greenfield opportunities, value-enhancing initiatives such as our direct-to-consumer platform and the performance of our core social casino business.Onto iGaming, where our performance reflected growth momentum in the U.S. and international markets as well as continued strength in our land-based original content launches and scaling third-party aggregation on our platform. Revenue in the quarter increased 13% year-over-year to $70 million and AEBITDA grew 21% to $23 million.Full year revenue increased by 15% to $275 million and AEBITDA was up 19% to $95 million. As a reminder, we benefited from termination fees in 2023 from certain operators as they pivoted on their digital strategy, which we do not expect to reoccur in 2024. AEBITDA margin improved 200 basis points to 33% in the quarter versus the prior year period, driven by revenue growth. This resulted in an overall AEBITDA margin of 35% for the year as we continued to benefit from scale while also investing in our portfolio.We saw solid growth year-over-year in both our North America and international markets with record player numbers on our platform in the quarter. Wagers processed through our iGaming platform increased to $21.6 billion, also a record high. In fact, we saw record quarters in the U.S. and Canada with GGR in each region up 23% year-over-year and with double-digit sequential quarterly growth. The U.S. market was driven by increased volume of land-based content, along with continued scaling of the OGS partner network.Ontario continues to ramp with increasing volume of first-party content. GGR volumes in Europe also reached record highs, marking our third sequential quarter of growth with 11% year-over-year improvement, driven by performance across first-party Elk and Lightning Box content. We are well positioned to continue expanding our iGaming business with best-in-class aggregation platform and a robust product portfolio.Going into 2024, we expect growth to be largely in line with overall market expansion, excluding the termination fees we benefited from in 2023. Contributions from Live Casino is expected to be a modest drag on AEBITDA and margins during the year as we continue to ramp up and invest in this business. I am confident in our ability to expand margins as we scale our offerings over time.Over the past year, we've diligently managed our cost base and drove margin expansion. Operational excellence remains a top priority as we further integrate our businesses and identify efficiencies. Importantly, with the results and healthy business that we saw this year, we will continue to reinvest back into all 3 platforms through R&D and CapEx to propel our growth pillars.We will maintain a strategic approach that ensures optimized output with a rigorous assessment of ROI. More importantly, we will continue to invest in our people and technology, the backbone of Light & Wonder that drove our success throughout this transformation and into the execution phase. As our business scales, we also expect associated corporate costs to increase proportionally, providing support for the business units through shared services and other functions.We are building out a lean management team to embed this methodology throughout the organization to drive efficiency and scale. We are challenging our teams to act like owners and arming them with tools and training to make a difference across the organization. As a reminder, in Q3, we called out elevated legal costs of approximately $10 million, which we expect will have an impact across the first and second quarters of 2024.That said, we will continue to stay laser focused on improving processes, staying committed to margin expansion and driving sustainable long-term profitability through value-enhancing initiatives, ensuring we have a prudent sourcing process to drive efficiency as we scale our gaming business and continuous improvement in developing our IT infrastructures.As I step into the CFO role, I'm fortunate to have inherited a business with a healthy balance sheet and a strong financial profile. After the SciPlay deal that we closed in October for approximately $500 million before fees and other expenses, we ended the year with a net debt leverage ratio of 3.1x, a 0.2 turn improvement over the prior year and within our targeted range of 2.5x to 3.5x. Recently in January, we were able to further improve our transformed debt profile by repricing our term loan B, reducing our interest rate by 35 basis points and driving approximately $8 million in annualized interest cost savings.With the refinance of our 8.625% senior unsecured notes that we completed in 2023, in total, we expect approximately $14 million in annualized interest expense savings. Our profile is further enhanced by gaining access to the cash on SciPlay's balance sheet and the cash flow generated from the business going forward, providing flexibility and optionality for sustainable growth and value creation as we continue to optimize our cash balances.We reported consolidated free cash flow of $70 million in the quarter. The current year period was affected by $16 million, primarily in cost supporting the strategic review and the related activities associated with the SciPlay merger, while prior year was affected by $176 million in cash taxes paid related to the divestitures. Full year consolidated free cash flow was $291 million, affected by $32 million in cash tax payments related to the divestitures and $25 million primarily in cost supporting the strategic review and related activities. Our 2023 free cash flow conversion rate, excluding the aforementioned items, was 31%, a 1,200 basis point increase from the prior year as we stayed committed to translating each dollar to the bottom line.Looking ahead, we expect restructuring costs to wind down as transaction-related costs roll off. Over the long term, cash interest savings will be at least partially offset by expected increases in capex, largely driven by gaming, as we continue to invest in growing our premium installed base. We'll have some puts and takes by quarter based on the seasonality of tax payments, working capital and other items. But our annual cash flow conversion rate is expected to increase over time on the flow-through of our highly cash-generative businesses, and as we continue to focus on capital decisions and returns.Free cash flow generation remains a key priority and a driver to enhancing shareholder value. In 2023, we continued what we set out to do: advancing our balanced and opportunistic capital allocation framework; debt reduction, which we've executed and evidenced through our transformed balance sheet; returning substantial capital to shareholders through share repurchases; and lastly, disciplined investment in key growth opportunities.We returned $25 million of capital to shareholders through share repurchases during the quarter for a total of $170 million returned during 2023. Since the initiation of the program, we have returned $575 million of capital to shareholders, which is approximately 77% of total program authorization. We'll continue to monitor the market for opportunities going forward.As I mentioned before, we will continue to invest in our people and core capabilities to support sustainable long-term growth and bolster our leadership positions with a commitment to driving high ROI, which exceeds our return thresholds. Our capital allocation priorities will always be in the context of a healthy balance sheet. That said, we remain flexible in evaluating all available options and we'll only deploy excess capital in the most value-accretive ways to our shareholders.We have a great team here at Light & Wonder, and I'm extremely excited to be partnering with Matt and the executive team to take us to the next level. We continue to execute to our strategy that is core to our culture in a resilient and dynamic industry. What our teams have accomplished to-date reflects strong momentum and best of all, high confidence in our growth journey continuing.With that, we will turn it over to the operator for your questions.

[Operator]

[Operator Instructions] Our first question comes from Barry Jonas of Truist Securities.

[Barry Jonas, analyst]

Can you give us an update on the road to $1.4 billion? Maybe talk about how it's progressing.

[Matthew Wilson, executive]

Yes, Barry, Matt Wilson. We anticipated that question. First of all, for the Light & Wonder employees on the line congratulations. What a fantastic quarter and a fantastic year. I think when we started off on this journey May of '22, we put our Investor Day targets out for $1.4 billion. It necessitated a 15% CAGR to get us there. We just closed 2023 with a 22% growth rate at the AEBITDA line, which was very impressive from my vantage point.I think one of the equally impressive things was all 3 of our businesses grew double digits. So, the portfolio of businesses we have really validates the strategic decisions that we made to focus the organization around content. I think we have in place the talent, the investments and the product pipeline to continue this pathway to the $1.4 billion. We've just kind of recalibrated our strategic plan and feel very confident we can get to the $1.4 billion.I think this team is also doing a fantastic job just around cost optimization. I think they're equally as focused on sustainable growth as they are in efficient growth. So, lots of pathways to get us there, and we feel like with the year we just had and the quarter we just had, great momentum leading into the remaining years of that strategic plan. But Oliver, you may want to add some detail.

[Oliver Chow, executive]

Yes. Thanks, Matt. And Barry, as Matt mentioned, we continue to have tremendous momentum across the business. We just posted our fifth consecutive quarter of double-digit year-over-year revenue growth across all 3 business units, which obviously gives us a lot of confidence in our ability to continue to deliver on our growth plans.We know what we need to do to execute against our commitments. And in Gaming, that's to achieve modest share gains in the core, core Class III. So, in game sales, we demonstrated game sales growth in 2023 across both North America and Australia markets, and we'll also continue to grow and expand the gaming operations premium installed base. The key for us will be the proliferation into adjacencies, and we'll continue to deliver strong products into Oregon State lottery, and we also recently announced our deal with Loto-Quebec. We'll also be entering the Georgia COAM market here in the first half.From a SciPlay perspective, we continue to drive record revenue and grow share as we continue to leverage our best-in-class SciPlay engine across the portfolio. And we expect to continue to scale ARPDAU while seeing stability in our player base, and that's going to be critical for us here over the next couple of years. We've made strategic UA marketing investments and we'll continue to do so effectively for long-term growth. And Josh and the team are just -- have just done an exceptional job in that space.In iGaming, we expect continued growth in global markets, particularly here in North America, as we've seen over the past couple of years. But more importantly, being able to leverage our proven land-based titles cross-platform, as evidenced in some of the record game launches you saw across 2023, that's expected to drive sustainable growth for us into the future.And then, lastly, Matt mentioned this earlier. Our margin enhancement initiatives were a key contributor for us and has showed in our healthy margin, so not only in the quarter, but for the full year. And we just see opportunities to expand that over time as we continue to improve efficiencies throughout the business.So long-short of it, our momentum and the performance in this quarter and 2023 really does give us a lot of confidence in our ability to capture the opportunities we see ahead to not only deliver $1.4 billion, but to drive sustainable growth past 2025.

[Barry Jonas, analyst]

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

[Matthew Wilson, executive]

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

[Operator]

Our next question comes from Chad Beynon of Macquarie.

[Chad Beynon, analyst]

Matt, Oliver, team; wanted to ask one specifically around gaming. Oliver, you just mentioned some of the adjacency opportunities like Oregon, Quebec, COAM, et cetera. But as we think about just the general replacement market, you're communicating with your partners in the U.S. and Australia. How does it feel currently, and how does this compare to prior years where the industry may have had elevated industry orders?

[Matthew Wilson, executive]

Yes, thanks Chad. I think the industry seems to be on solid footing. I think we're seeing healthy player trends across all of our end markets. I think we did see some isolated softness in January in the U.S. land-based market in certain areas, and I think that was really attributed to weather. And I think that's a kind of one-time event that we cycled over. But aside from that, really healthy end markets. I think one of the data points that's uniquely interesting to us is the Eilers survey from Q4 and looking at specifically purchase intentions.So, it does look like in that number, forward-looking purchase intentions by casino operators in North America are up sequentially and year-on-year, which I think is very encouraging. There was also a nice tick up in terms of their intentions to allocate their share to Light & Wonder. So I think the end markets are looking healthy. We stay focused on controlling the controllables, build great product, deliver great service to our customers, and we'll win as a consequence of that.

[Oliver Chow, executive]

Yes. And just to build on that, Matt, obviously, we haven't seen any major shifts just from an operator's purchasing behavior. So, we do see a pretty solid funnel demand here in Q1 and starting the early kind of stages of Q2 funnel. In addition, we also see solid data points from a coin-in perspective, and those are trending well with our high-performing WAP titles. So, broadly speaking, we don't see anything in the data that would suggest any major shifts. But if we do, we're well positioned to move and pull levers as we've executed on some really important critical operational enhancement initiatives. So overall, to Matt's point, healthy GGR levels, resilient gaming consumer, and we'll just be nimble if anything shifts.

[Chad Beynon, analyst]

It's good to hear. Thank you very much. Appreciate it.

[Operator]

The next question comes from David Katz of Jefferies.

[David Katz, analyst]

So, I wanted to talk about product and some of the standout, what we've seen so far from Dragon Train, which is primarily, if I'm correct, driving Australia and not fully loaded and approved in the U.S., right? That's happening over the next couple of quarters. If you could just color in for us what we might expect to see from that, and just help us understand what other product introductions we might be seeing in those coming months that sort of drive us through the rest of this year also. And then I have one quick follow-up.

[Matthew Wilson, executive]

Yes, great. Thanks, David. Yes, this is the product we're really excited about. We debuted this at the AG show back in August, subsequently went to market in Australia, very quickly went to numbers 1, 2, 3 and 4 in the Australian market. Has really been dominating the New South Wales market. It was now in Queensland and in Victoria, it's done very well across all of those markets. So kudos to the team down there that's built this market-leading product. We're really excited about taking it to all of our markets, not just Gaming, but taking it to SciPlay and also taking it to iGaming.The launch in the U.S. is imminent. So it's a this quarter, next quarter type rollout event. Pipeline is building nicely. But I think importantly, we've got a real diverse set of product that's driving interest from operators. I think, again, pointing back to the Eilers survey, we had a really nice release last week with a diverse set of games kind of lighting up the charts. So really encouraged by that, and the teams across the globe, not just the Dragon train team who we're really proud of, but the entire R&D organization.You can just really start to see the fruits of the labor that's gone into kind of turning the product strategy around, showing up on the scoreboard in the Eilers results and that ultimately will show up on the scoreboard from a financial perspective. So, yes, launch is imminent in the U.S. and it'll go across all of our channels and we're very excited about that product.

[David Katz, analyst]

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

[Oliver Chow, executive]

Yes. Thanks for the question. Yes, listen, I think we look at free cash flow in a couple of different ways. One is, we're going to look at it from an annualized basis, first and foremost. So, we know there's a lot of noise within some of the quarters. In terms of kind of guidance, we haven't really provided updated guidance there, but what I will say is that we see us optimizing our cash flow here, and ultimately, this is a great starting point for us and we'll continue to sustainably drive that higher over the coming years. But there will be some puts and takes here, but I think, ultimately, we're going to scale from this point forward.

[Operator]

Our next question comes from Rohan Gallagher of Jarden.

[Rohan Gallagher, analyst]

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

[Matthew Wilson, executive]

Yes. Hi Rohan and everyone down under. Yes, the adjacencies opportunity is a big theme of the gaming story here in terms of growth over the next few quarters and few years, I would say, it's a share taker strategy. These are markets that we've been delivering exactly 0% share in for the last 5 years. And so every incremental order we get in these adjacencies is naturally a share gain.So, yes, like you said, OSL has been a great opportunity for us. We're a market leader in that space now. Our product that we've rolled out is the best performing in that region, which is exciting. We should see subsequent orders coming off the back of that OSL introductory.We announced the Loto-Quebec opportunity. They've been a great partner of ours for years. So this is expanding that partnership into the VLT space. So that's a 2024 opportunity, which is exciting. I think Georgia COAM, we announced our partnership with Betsson. So, we're starting to transact in that market. This is a kind of a multi-year journey with the Georgia COAM market.And then, historical horse racing. We were an early adopter here in the HHR world, and it's proven to be a great tailwind for us. We're a market leader in that space. We command a leading share position. So as that market continues to expand, we naturally expand along that with great share in those markets. So, yes, significant driver for the gaming business, which I think is important.Like I said, these are discrete markets with the unique opportunities. We've got the capability to build the product, and it's not as competitive as you see in the Class III replacement market. So we're kind of expecting more modest share gains in the Class III space, but really a big driver of the plan is these adjacent categories.

[Rohan Gallagher, analyst]

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

[Matthew Wilson, executive]

Yes. So we're active in Class II in many markets. So, yes, significant opportunity for us. And I think that will be more in the kind of late '24, '25 time frame as we start to expand beyond the tranche of adjacencies that I just mentioned.

[Rohan Gallagher, analyst]

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

[Oliver Chow, executive]

Yes. Yes, thanks Rohan. Yes, as I mentioned in the prepared remarks, it was the U.K. order that had a mix effect on our ASP. We do expect that to be, I would say, somewhat leveled into '24 as we proliferate into these adjacent markets. We know that these adjacent markets have slightly lower ASPs than your typical Class III replacement market. So, I would imagine that it'll still be impacted from that perspective.

[Operator]

The next question comes from Ryan Sigdahl of Craig Hallum.

[Ryan Sigdahl, analyst]

Hey Matt and Oliver, curious on live dealer. So, nice to see that launch here, adding Penn, some good updates there. But curious how quickly you think you can really scale this product given the enormous market opportunity with effectively 1 competitor out there? And then secondly, kind of along that, is the plan to lean in and expand more with DraftKings and Penn with bespoke and branded tables across different states? Or is the higher priority and kind of lower-hanging fruit is to try and get active with more operators?

[Matthew Wilson, executive]

Yes, a great question. We see live dealer as a multi-year opportunity. We believe in the outlook for iGaming. States will legalize naturally over the coming years. And so, we just look into the future and say this will be a large and active market. We have the Shuffle Master IP under the hood in terms of a portfolio of assets. So it's a natural extension of our end market. So it's a market we're going to be in. We're going to position ourselves for the long term here.So, really, in the near-term, it's about nailing and scaling. So nail, Michigan, continue to expand partners there, get it to a point where we've ironed everything out and we're optimized, and at that point, we can naturally move into the other markets that are live at the moment. So, we have no shortage of demand to take the product into other states that are legal at the moment, but we want to make sure that we've got Michigan completely nailed down and then we'll scale over extended markets.But, I would say, the best way to think about live dealer for us is, this market is going to be big. It's going to be vibrant over the coming years, and my responsibility is to position the business for success in perpetuity and live deal is a natural space for us to participate in.

[Operator]

Next up, we have Rohan Sundram from MST Marquee.

[Rohan Sundram, analyst]

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

[Matthew Wilson, executive]

Yes. Hey thanks for the question Rohan. Yes, particularly exciting for me, having started my career in Australia and moved to Asia. So it's really nice to see the team down there delivering such exceptional results. I think the international business broadly delivered 93% year-on-year growth in terms of gaming sales, which is a huge growth number. And really the consequence of 2 things. One is Asia coming back online in a material way, but then also very impressive share gains in the Australian market, year-on-year, up from 14% to 24%.This is a market we were at 7% to 9% share player and pretty irrelevant, to be honest with you. So, I think this is becoming a great contributor to our success. Obviously, the products that are driving our success down there are going to go global, but also demonstrates just our ability to get into new markets to make appropriate investments and deliver great returns.So, yes, it just gives us a lot of confidence in other areas of the gaming market that we can get in, and explore. So incredibly exciting. Yes, and just a quick add to that, I think for us, it's much broader than just Dragon train. I mean, we'll continue to drive our evergreen franchises, which really fuel the initial part of our growth here in Australia, and we'll have strong depth and breadth of product overall to be able to drive share gains over time.

[Operator]

The next question is from Joe Stauff of SIG.

[Joseph Stauff, analyst]

Thank you. Hi, Matt, Oliver. I wanted to ask about North American game ops and just kind of how to think about the right levels of growth in terms of the main inputs, installed base and revenue per unit. Is there a way to think about just the installation of premium games throughout the year over the past 4 quarters in '23, meaning that increased monetization, will it be lumpy in terms of kind of what sort of quarterly improvement we see in '24? What's the right way to think about that?

[Matthew Wilson, executive]

Yes. Obviously, there's kind of 2 major drivers there. There's obviously installed base growth, and then what are we doing on the RPD side. So, on the revenue per day, we've seen a nice sequential uptick in terms of the revenue per day, and that really is driven by better product and a more premiumization of the installed base.I think you'll see an inflection point in 2024, from my vantage point, with the portfolio we have lined up, kind of the complementary nature of the different cabinets we're launching and games we're launching. We've done a lot of heavy lifting in the installed base to make sure that our legacy fleet has been addressed with an appropriate amount of CapEx.So I think you'll see RPDs kind of in this range and then kind of the net benefit will be as we start to expand the installed base over time, that'll be the tailwind that drives that revenue for that segment higher. But again, I feel like 2024 looks like an inflection point from where I'm standing in terms of the net adds you'll start to see quarter-over-quarter.

[Joseph Stauff, analyst]

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

[Matthew Wilson, executive]

Yes. I mean those titles you mentioned specifically are premium gaming ops titles, so they won't be sold -- they won't be taken to those other markets. So, it really is in the U.S. a premium gaming ops story for those titles that you mentioned and the portfolio is designed specifically for that. So, yes, we're encouraged about the lineup and what it can produce for us in 2024 and beyond.

[Operator]

The next question comes from Jeff Stantial of Stifel.

[Jeffrey Stantial, analyst]

Hey, Matt and Oliver. So, another strong quarter here in SciPlay ARPDAU, up 15% year-on-year on an 18% comp. Matt, can you just spend a minute here on the forward outlook? More specifically, what inning would you say you're in with regards to harvesting returns on some of the investments that you've made into the centralization engine and ad-tech capabilities? And to add to that, can you just expand a bit more on the DTC rollout? What's left in terms of execution on product development? What levers can you pull to encourage user adoption? And how should we think about the cadence of adoption, maybe relative to peers out there with more mature DC offerings? That's all from me.

[Matthew Wilson, executive]

Yes. No, great question. I think SciPlay is becoming quite metronomic about the way they just deliver outstanding result after outstanding result. Clearly, the fastest-growing social casino company in the industry and taking wild amounts of share. And I think it all comes back to -- we've got a best-in-class team with a really focused strategy. So we've made the right strategic investments about 2 years ago in the SciPlay engine, which just really gave us all the tools that we needed to make sure that we were driving each of our games efficiently.So, again, nice uptick in ARPDAU. Rally holding on to our DAU across all the 4 major games. It was a collective effort across many games that drove this result. So in this business, the trend is your friend or your enemy. I mean, so for us, we're kind of up into the right with SciPlay, and we have been for the last few years. So, nothing suggests that that will stall anytime soon, great momentum leading into Q1. Yes, but a fantastic result for SciPlay in what is apparently a challenged market.Oliver, anything to add or subtract?

[Oliver Chow, executive]

Yes. I think just a couple of adds there. I think we are also focused on developing our DTC platform, which we expect will enhance player relationship engagement over time, and that should hopefully accelerate our -- the potential of our expanded margins and then grow player lifetime values. The other thing that we talk about a lot is really just the continued prudent and diligent spend across marketing UA. Josh and the team are the best in the business, driving high ROI over in this space.And so we'll continue to identify a number of these opportunities throughout 2024. As I mentioned earlier, we're doing concurrent marketing campaigns for Joel McHale and Jerry O'Connell. So, the teams are looking to drive high return UA spend here and we'll continue to kind of evaluate that over time.

[Matthew Wilson, executive]

Yes. And maybe specifically to your question about which inning are we in? I'd say we're in kind of early middle innings in terms of the growth profile on the gains that we have. I think in relation to DTC, we haven't even sung the national anthem yet. Like, if you look at our industry peers, they're putting 24% to 25% through DTC, we're less than 1%. So the optionality for us is all in front of us, and that's a great margin enhancement opportunity for us over the coming years.

[Operator]

The next question comes from Justin Barratt of CLSA.

[Justin Barratt, analyst]

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

[Matthew Wilson, executive]

Yes. Nice to be with you. I think probably twofold. Continued success in Australia. It's a large, vibrant market. It's been stable and resilient for decades and we expect it to continue that way. So, continuing to take share in that market. I think with Dragon Train and other products, we're very early in the cycle in terms of what looks like a multi-quarter, multi-year opportunity for us in Australia. And then I think in Asia, I was back there in September of last year. I lived there for 5 years in a formal life, and just so fantastic to see that market back on solid footing.You see Macau coming back to life on the operator side and with the churn opportunity there, that's exciting for us over the next couple of years. But I think the really exciting opportunity is the Philippines. The Chairman of PAGCOR down there, the regulators, has a mandate to grow GGR in a very big way. And so that comes off the back of investing in slot products, in new IRs and we are a market leader in Asia. So I think Asia is a very exciting opportunity for us, but specifically the Philippines. So, yes, looking forward to making the most of that opportunity over the coming years.

[Operator]

The next question comes from Allan Franklin of Canaccord Genuity.

[Allan Franklin, analyst]

Yes, a fair few of my questions have been answered, but just one quick one please, just around post the SciPlay acquisition and just looking at the current leverage in the business, it does feel like this will sort of trickle down over the course of time. But how are you thinking about your capital allocation plans going forward, please, in the current situation with the buyback program?

[Matthew Wilson, executive]

Yes, thank you for the question. Our capital management strategy stays largely consistent with what we've previously shared. We continue to see the benefit of our strong balance sheet, positioning us really well to take on value accretive opportunities as they arise. Specifically to your question around leverage, we are comfortably within our targeted range of 2.5x and 3.5x, and we ended the year at 3.1x levered, and that's following the completion of the SciPlay transaction.We believed back in Q3 that the SciPlay transaction was about a 0.5 turn increase, but we were able to delever and capitalize on our highly cash-generative businesses. Now that the SciPlay transaction has been completed and our leverage remains well within our targeted range, we will continue to be opportunistic with the share repurchase program. In fact, we've just created a more structured program, which we're now currently implementing.So long term, we continue to see this as a significant value creation opportunity for us. We were active throughout 2023, and in Q4, we purchased about $25 million worth of shares. And from a full year '23 point of view, we spent $170 million to buy back shares.So, looking ahead, we'll continue to execute on our capital allocation priorities in a very disciplined manner, whether that's further investments in R&D and CapEx or other uses of funds. So we'll continue to evaluate that. But we're in a great place just given where we are from a balance sheet perspective.

[Oliver Chow, executive]

Yes. Maybe just one additional build there. We did a lot of heavy lifting through the divestitures and the strategic review to clean up the complexity in the portfolio. And what we have now is a very focused organization with a very clear mission about being the leading cross-platform global games company. We want to stay true to that. I think that strategy has been validated. Like I said earlier, all 3 of our business is growing double digits.So, what you can expect from us is a management team that's very focused on being efficient around cost, but also with capital allocation, making sure we have a very high bar for anything M&A related and staying really focused on keeping the leverage where we said it would be and buying back our stock.

[Operator]

And our final question comes from Carlo Santarelli of Deutsche Bank

[Carlo Santarelli, analyst]

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

[Oliver Chow, executive]

That's correct, yes.

[Carlo Santarelli, analyst]

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

[Matthew Wilson, executive]

Yes, that is a pretty complex question. But I guess my initial reaction to that is, we have seen a shift away from our public markets installed base towards the premium category. So there is a tailwind there in terms of RPDs because the RPDs in the premium category are obviously higher than the public. We do expect through '24 for that to continue, in terms of the ads that come into the installed base to be premium units.So that will be kind of incremental to RPDs over time. That's the way to kind of think about kind of the construct of our installed base in relation to premium gaming ops. So, I'd say there's some upside here from an RPD perspective given the mix shift, and then we expect our installed base to grow over time.

[Carlo Santarelli, analyst]

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

[Oliver Chow, executive]

Yes. No, thank you. Yes, listen, we know that R&D and CapEx sort of call this organic investment, is a critical component to our growth as we move forward. So, we do see a combined R&D and CapEx target of about 17% at the total level. And obviously, that's at the gross level between, I would say, a 10% and a 7% R&D to CapEx level.So that's at the gross level. And ultimately, as our revenues continue to scale over time, that will just give us further ammunition to reinvest back into our core and drive sustainable growth over time. So, this is absolutely an area of focus for us, and we'll continue to invest organically as we believe that's the highest -- one of the highest returns of ROI for us.

[Carlo Santarelli, analyst]

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

[Matthew Wilson, executive]

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

[Operator]

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

[Matthew Wilson, executive]

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

[Operator]

This concludes today's call. Thank you for joining. You may now disconnect your lines.