Consolidated Revenue from Continuing Operations of $572 Million Up 26% Year-Over-Year
Closed Sale of Lottery Business Generating $5.6 Billion in Gross Cash Proceeds as Company Executes on Vision to be a Leading Cross-Platform Global Game Company
Significantly De-Levering, Reducing Principal Amount of Outstanding Debt(1)(2) from $8.9 Billion at Quarter-end to Adjusted Outstanding Debt(1)(2) of $4.0 Billion and Adjusted Net Debt Leverage Ratio(1)(2) of 3.7x
Returned $140 Million of Capital to Shareholders Through the Repurchase of 2.4 Million Shares(3)
LAS VEGAS–(BUSINESS WIRE)–Light & Wonder, Inc. (NASDAQ: LNW) (formerly known as Scientific Games Corporation) (“Light & Wonder,” “L&W,” or the “Company”) today reported results for the first quarter ended March 31, 2022.
Barry Cottle, President and Chief Executive Officer of Light & Wonder, said, “We kicked off 2022 with a number of significant achievements and strong momentum across our businesses with strong revenue growth of 26% in the quarter. The sale of our Lottery Business was another significant milestone as we de-lever and maximize cash, which transformed our balance sheet reducing our net debt leverage ratio(2) from a peak of 10.5x just over 15 months ago to an adjusted net debt leverage ratio(1)(2) of 3.7x, or by approximately 7 turns. We are delivering on our promises to create great content cross-platform while expanding in high-growth digital markets and enabling a seamless player experience. With a reconstituted balance sheet, sustainable double-digit growth and strong cash generation, we now have the ability to significantly enhance shareholder value through a disciplined approach to capital allocation.”
“With the right assets, at the right time and with the right talent, Light & Wonder is fostering a high performance culture with all the pieces in place to deliver on our vision. We are very excited about the next phase of our journey and look forward to discussing our key strategies and the path to drive shareholder value at our upcoming investor day on May 17th.”
Connie James, Chief Financial Officer of Light & Wonder, said, “The performance during the quarter is reflective of the enthusiasm and energy felt throughout Light & Wonder as we entered 2022 with strong momentum across all our businesses, generating double-digit top and bottom-line growth. I also want to congratulate the team on the successful close of the Lottery Business sale and refinancing transactions. Collectively, these transactions significantly change the complexion of our balance sheet, substantially reduce our outstanding debt, and meaningfully strengthen our credit profile.”
“With our strengthened balance sheet we are actively executing on our capital allocation priorities, including $140 million return on capital through the repurchase of our shares just since the beginning of March. Going forward we are accelerating our focus on our operations as we complete these transactions, and the next phase of our growth strategy will drive further operational excellence throughout our organization creating sustainable and profitable long-term growth.”
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(1) Principal amount of outstanding debt represents outstanding principal value of debt balances as of March 31, 2022 that conforms to the presentation found in Note 11 to the Consolidated Financial Statements in our March 31, 2022 Form 10-Q. Adjusted outstanding debt represents the principal amount of outstanding debt as of March 31, 2022 adjusted for the impact of the April 14, 2022 refinancing transactions. Adjusted net debt leverage ratio represents adjusted net debt reflecting refinancing transactions, the Lottery Business operations sale and excluding certain immaterial continuing operations equity method investments. |
|
(2) Represents a non-GAAP financial measure. Additional information on non-GAAP financial measures presented herein is available at the end of this release. |
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(3) The amount and share count as of May 6, 2022. |
BUSINESS AND STRATEGY UPDATE
- Overall, the Company, now rebranded as Light & Wonder, is executing on the key promises made as part of its strategic review, delivering on its double-digit growth profile and making significant progress on its capital allocation priorities to significantly de-lever, return substantial capital to shareholders and invest in key growth opportunities.
- Delivered double digit revenue growth driven by continuing Gaming recovery combined with Gaming operations revenue exceeding 2019 levels and growth in both iGaming and SciPlay year-over-year and sequentially.
- Streamlined the organization with the completed Lottery Business divestiture(1), which closed on April 4, 2022 for $5.6 billion in gross cash proceeds, with the sale of the Sports Betting Business expected to be completed in the third quarter of 2022, subject to applicable regulatory approvals and other customary closing conditions.
- Significantly de-levered and transformed the balance sheet as a result of the April 14, 2022 debt pay down and refinancing transactions, that reduced the principal face value of debt outstanding from $8.9 billion as of March 31, 2022 to an adjusted outstanding debt(2)(3) of $4.0 billion and the adjusted net debt leverage ratio(2)(3) to 3.7x from net debt leverage ratio(3) of 10.5x just 15 months ago. These actions are expected to result in approximately $225 million(4) in annualized cash interest savings. The Company is on a clear path to reach its target net debt leverage ratio range(3) of 2.5x to 3.5x with the sale of the Sports Betting Business.
- Returned $140 million of capital to shareholders through the repurchase of approximately 2.4 million shares of common stock since initiation of the program on March 3, 2022, and through May 6, 2022.
- Invested in key growth opportunities, both organically and inorganically in content and digital markets to accelerate growth. Organic investments include R&D, capex, the launch and investment in our new Las Vegas iGaming studio, and expansion into a live dealer market. On April 29, 2022, we acquired Playzido, a targeted acquisition which will fuel our iGaming content offering, and in March SciPlay acquired Alictus, a proven casual game developer as SciPlay rapidly expands in the casual market.
- Hosting an investor day on May 17th in New York City, to provide an update on our strategy and progress on key initiatives.
SUMMARY RESULTS
We have reflected our Lottery and Sports Betting businesses as discontinued operations, for all periods presented. Unless otherwise noted, amounts, percentages and discussion included below reflect the results of operations and financial condition from the Company’s continuing operations which includes its Gaming, SciPlay and iGaming businesses.
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|
Three Months Ended |
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|
($ in millions) |
2022 |
|
2021 |
||||||||||||||||||
|
|
Continuing Operations |
|
Discontinued Operations |
|
Combined |
|
Continuing Operations |
|
Discontinued Operations |
|
Combined |
||||||||||
|
Revenue |
$ |
572 |
|
|
$ |
288 |
|
$ |
860 |
|
|
$ |
453 |
|
|
$ |
276 |
|
$ |
729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net (loss) income |
|
(67 |
) |
|
|
95 |
|
|
28 |
|
|
|
(88 |
) |
|
|
79 |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net cash (used in) provided by operating activities(5) |
|
(14 |
) |
|
|
108 |
|
|
94 |
|
|
|
25 |
|
|
|
98 |
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Capital expenditures |
|
43 |
|
|
|
25 |
|
|
68 |
|
|
|
35 |
|
|
|
15 |
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Non-GAAP Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
AEBITDA(3) |
$ |
202 |
|
|
$ |
120 |
|
$ |
322 |
|
|
$ |
142 |
|
|
$ |
128 |
|
$ |
270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Free cash flow(3)(5) |
|
(83 |
) |
|
|
72 |
|
|
(11 |
) |
|
|
(16 |
) |
|
|
96 |
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
As of |
||||||||||||||||||||
|
Balance Sheet Measures |
March 31, 2022 |
|
December 31, 2021 |
||||||||||||||||||
|
Combined cash and cash equivalents |
$ |
582 |
|
|
$ |
629 |
|
||||||||||||||
|
Total debt |
|
8,833 |
|
|
|
8,690 |
|
||||||||||||||
|
Available liquidity(6) |
|
1,210 |
|
|
|
1,417 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(1) Excluding the sale of certain international Lottery business subsidiaries (Scientific Games International GmbH, and its two subsidiaries (the “Austria Business”)), for which we are awaiting regulatory approval in Austria, which approval is expected to be received and the transaction to be completed by the end of the second quarter of 2022, with $104 million in additional expected gross cash proceeds, subject to customary closing conditions. |
|||||||||||||||||||||
|
(2) Adjusted outstanding debt represents the principal amount of outstanding debt as of March 31, 2022 adjusted for the impact of the April 14, 2022 refinancing transactions. Adjusted net debt leverage ratio represents adjusted net debt reflecting refinancing transactions, the Lottery Business operations sale and excluding certain immaterial continuing operations equity method investments. |
|||||||||||||||||||||
|
(3) Represents a non-GAAP financial measure. Additional information on non-GAAP financial measures presented herein is available at the end of this release. |
|||||||||||||||||||||
|
(4) Term loan interest rate calculated based on the current interest rate, undrawn revolving credit facility, and a portion of 2025 Secured Notes reflective of an interest rate of approximately 2.946% as a result of certain cross-currency interest rate swap agreements, more fully described in the principal debt balance supplemental information at the end of this release. |
|||||||||||||||||||||
|
(5) Net cash (used in) provided by operating activities from continuing operations and free cash flow from continuing operations for the three months ended March 31, 2022 and 2021 include $117 million and $123 million, respectively, of cash interest payments. |
|||||||||||||||||||||
|
(6) Available liquidity is calculated as cash and cash equivalents including those in the businesses held for sale, plus remaining revolver capacity, including the SciPlay Revolver. |
|||||||||||||||||||||
First Quarter 2022 Financial Highlights:
- First quarter consolidated revenue was $572 million compared to $453 million, up 26% compared to the prior year period. Our Gaming business demonstrated continued strong momentum in the North American market including growth in all lines of business year-over-year, with total Gaming operations revenue exceeding 2019 levels. Revenue also benefited from sequential and year-over-year growth at our SciPlay and iGaming businesses.
- Net loss from continuing operations was $67 million compared to a net loss of $88 million in the prior year period. Net loss decreased as a result of higher operating income driven by double digit revenue growth. The prior year net loss from continuing operations included a $25 million gain on remeasurement of Euro denominated debt compared to the current year gain of $7 million.
- Consolidated AEBITDA from continuing operations, a non-GAAP financial measure defined below, was $202 million, up 42% as compared to the prior year period, primarily driven by double-digit AEBITDA growth in Gaming.
- Net cash (used in) provided by operating activities from continuing operations was $(14) million compared to $25 million in the prior year period, and $94 million on a combined basis. The current year cash flows were impacted by an unfavorable change in working capital accounts, primarily related to the timing of disbursements including costs associated with the strategic transactions, higher incentive compensation payout, and timing of inventory purchases to limit supply chain impacts and support future sale levels.
- Combined free cash flow, a non-GAAP financial measure defined below, was $(11) million, which includes both continuing and discontinued operations. The current year combined free cash flow was impacted by the working capital changes described above.
- Adjusted net debt leverage ratio(1), a non-GAAP financial measure defined below, reflecting the April 4th Lottery Business sale as of March 31, 2022 and subsequent refinancing transactions would have been 3.7x, compared to 6.1x reported. The Company anticipates that it will achieve a net debt leverage ratio(1) within its target range of 2.5x to 3.5x following the completion of the previously announced sale of its Sports Betting Business, which is expected to occur in the third quarter of 2022, subject to applicable regulatory and other customary closing conditions.
|
CONTINUING OPERATIONS BUSINESS SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2022 |
|||||||||||||||||||||||||||||||||||
|
($ in millions) |
Revenue |
|
AEBITDA |
|
AEBITDA Margin(2)(3) |
||||||||||||||||||||||||||||||
|
|
|
2022 |
|
|
2021 |
|
$ |
|
% |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
|
2022 |
|
|
2021 |
|
|
PP Change(3) |
||||||
|
Gaming |
$ |
355 |
|
$ |
244 |
|
$ |
111 |
|
45 |
% |
|
$ |
171 |
|
|
$ |
107 |
|
|
$ |
64 |
|
|
60 |
% |
|
48 |
% |
|
44 |
% |
|
4 |
|
|
SciPlay |
|
158 |
|
|
151 |
|
|
7 |
|
5 |
% |
|
|
44 |
|
|
|
46 |
|
|
|
(2 |
) |
|
(4 |
) % |
|
28 |
% |
|
30 |
% |
|
(2 |
) |
|
iGaming |
|
59 |
|
|
58 |
|
|
1 |
|
2 |
% |
|
|
21 |
|
|
|
21 |
|
|
|
— |
|
|
— |
% |
|
36 |
% |
|
36 |
% |
|
— |
|
|
Corporate and other(4) |
|
— |
|
|
— |
|
|
— |
|
— |
% |
|
|
(34 |
) |
|
|
(32 |
) |
|
|
(2 |
) |
|
(6 |
) % |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
Total |
$ |
572 |
|
$ |
453 |
|
$ |
119 |
|
26 |
% |
|
$ |
202 |
|
|
$ |
142 |
|
|
$ |
60 |
|
|
42 |
% |
|
35 |
% |
|
31 |
% |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
PP – percentage points. |
|||||||||||||||||||||||||||||||||||
|
n/a – not applicable. |
|||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||
|
(1) Represents a non-GAAP financial measure. Additional information on non-GAAP financial measures presented herein is available at the end of this release. |
|||||||||||||||||||||||||||||||||||
|
(2) Segment AEBITDA Margin is calculated as segment AEBITDA as a percentage of segment revenue. |
|||||||||||||||||||||||||||||||||||
|
(3) As calculations are made using whole dollar numbers, actual results may vary compared to calculations presented in this table. |
|||||||||||||||||||||||||||||||||||
|
(4) Includes amounts not allocated to the business segments (including corporate costs) and other non-operating expenses (income). |
|||||||||||||||||||||||||||||||||||
First Quarter 2022 Key Highlights
- Gaming revenue increased 45% to $355 million compared to the prior year period, primarily driven by continued market recovery reflecting strong growth in Gaming operations, which exceeded 2019 levels driven by record North America premium installed base units, continued elevated average daily revenue per unit, coupled with growth in Game sales, Systems and Table games businesses. Strong revenue growth resulted in AEBITDA growth of 60% from the prior year comparable period.
- Gaming Operations revenue increased 37% driven by the gaming recovery coupled by the successes of our premium games on the Mural cabinets along with strong content performance. Additionally, we saw positive momentum with the launch of the Kascada Dual Screen, validating our continued investment in R&D to drive our long-term growth. Our North American premium installed base grew for the 7th consecutive quarter, now at a record 43% of our total installed base mix.
- SciPlay revenue grew 5% to $158 million compared to the prior year period, the 2nd highest quarter in its history. Growth was driven by an increase in average monthly paying users due to a higher payer conversion rate during the period. SciPlay’s core games continued to display strong performance with an average daily users increase of 4% sequentially and monthly active users increase of 7% sequentially.
- Alictus was acquired on March 1, 2022, a Turkey-based hyper-casual game studio, which expands SciPlay’s business in the casual gaming market, growing their game pipeline and diversifying their revenue streams as they advance their strategy to be a diversified global game developer.
- iGaming revenue increased 2% due to continuing momentum in the U.S. market coupled with the strong performance of acquired businesses in the second half of 2021. The U.S market delivered a 63% year-over-year growth driven by the strength of our original content. The prior year revenue benefited from elevated player engagement during COVID-19. Wagers processed through OGS increased from $16.9 billion in the prior year period to $17.5 billion in 2022 and the business achieved record gross gaming revenue in March 2022 for the first time. AEBITDA remained relatively flat from the prior year period due to investments supporting ongoing growth including our upcoming launch of live dealer in the U.S. In April in conjunction with Ontario Canada’s launch of online gaming, we achieved our biggest single market launch, going live with 8 operators on day 1.
LIQUIDITY
- Significant debt reduction and refinancing was completed in April of 2022, which collectively with the Lottery Business proceeds, reduced our principal amount of outstanding debt(1)(2) from $8.9 billion as of March 31, 2022 to $4.0 billion(3), which is expected to result in approximately $225 million(4) in annualized cash interest savings.
- Adjusted net debt leverage ratio(1), a non-GAAP financial measure defined below, reflecting the April 4th Lottery business sale as of March 31, 2022 and subsequent refinancing transactions would have been 3.7x, compared to 6.1x reported. The Company anticipates that it will achieve a net debt leverage ratio(1) within its target range(1) of 2.5x to 3.5x following the completion of the previously announced sale of its Sports Betting Business, which is expected to occur in the third quarter of 2022, subject to applicable regulatory and other customary closing conditions.
- Net cash (used in) provided by operating activities from continuing operations was $(14) million compared to $25 million in the prior year period, and $94 million on the combined basis. The current year cash flows were impacted by an unfavorable change in working capital accounts, primarily related to the timing of disbursements including costs associated with the strategic transactions, higher incentive compensation payout, and timing of inventory purchases to limit supply chain impacts and support future sale levels.
- Combined Free cash flow, a non-GAAP financial measure defined below, was $(11) million, which includes both continuing and discontinued operations. The current year combined free cash flow was impacted by the working capital changes described above.
- Capital expenditures from continuing operations were $43 million and including discontinued operations capital expenditures totaled $68 million in the first quarter of 2022.
|
(1) Represents a non-GAAP financial measure. Additional information on non-GAAP financial measures presented herein is available at the end of this release. |
|
(2) Principal amount of outstanding debt represents outstanding principal value of debt balances as of March 31, 2022 that conforms to the presentation found in Note 11 to the Consolidated Financial Statements in our March 31, 2022 Form 10-Q. |
|
(3) Represents Adjusted outstanding debt, which is the the principal amount of outstanding debt as of March 31, 2022 adjusted for the impact of the April 14, 2022 refinancing transactions. |
|
(4) Term loan interest rate calculated based on the current interest rate, undrawn revolving credit facility, and a portion of 2025 Secured Notes reflective of an interest rate of approximately 2.946% as a result of certain cross-currency interest rate swap agreements, more fully described in the principal debt balance supplemental information at the end of this release. |
Earnings Conference Call
As previously announced, Light and Wonder executive leadership will host a conference call on Tuesday, May 10, 2022, at 4:30 p.m. EDT to review the Company’s first quarter results. To access the call live via a listen-only webcast and presentation, please visit explore.lnw.com/investors/quarterly-earnings/ and click on the webcast link under the Investor Information section. To access the call by telephone, please dial: +1 (844) 200-6205 for U.S. or +1 (646) 904-5544 for International and ask to join the Light & Wonder call using conference ID: 897382. A replay of the webcast will be archived in the Investors section on www.lnw.com.
About Light & Wonder
Light & Wonder, Inc. (NASDAQ: LNW) (formerly known as Scientific Games Corporation) (“Light & Wonder” or “L&W”) is a global leader in cross-platform games and entertainment. The Company brings together over 5,600 employees from six continents to connect content between land-based and digital channels with unmatched technology and distribution. Guided by a culture that values daring teamwork and creativity, the Company builds new worlds of play, developing game experiences loved by players around the globe. Its OpenGaming™ platform powers the largest digital-gaming network in the industry. The Company is committed to the highest standards of integrity, from promoting player responsibility to implementing sustainable practices. To learn more, visit www.lnw.com.
You can access our filings with the SEC through the SEC website at www.sec.gov or through our website, and we strongly encourage you to do so. We routinely post information that may be important to investors on our website at explore.lnw.com/investors/, and we use our website as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (Reg FD).
The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document, and shall not be deemed “filed” under the Securities Exchange Act of 1934, as amended.
|
All ® notices signify marks registered in the United States. © 2022 Light & Wonder, Inc. All Rights Reserved. |
Forward-Looking Statements
In this press release, Light & Wonder makes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “target,” “should,” “could,” “potential,” “opportunity,” “goal,” or similar terminology. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other factors, including, among other things:
- the impact of the COVID-19 pandemic and any resulting unfavorable social, political, economic and financial conditions, including the temporary and potentially recurring closure of casinos and lottery operations on a jurisdiction-by-jurisdiction basis;
- risks relating to the intended sale of the Austria Business, for which we are awaiting regulatory approval in Austria, which approval is expected to be received and the transaction to be completed by the end of the second quarter of 2022 and the sale of our Sports Betting business, which is expected to be completed in the third quarter of 2022, both subject to applicable regulatory approvals and in the case of the sale of our Sports Betting business, other customary closing conditions (“Pending Divestitures”), including lack of assurance regarding the timing of completion of the pending and proposed transactions and related risks associated with the ongoing operations and activities of the Sports Betting Business, that certain deferred tax assets may not be realized relative to the anticipated tax gain from these divestitures, that the transactions will yield additional value or will not adversely impact our business, financial results, results of operations, cash flows or stock price;
- our inability to successfully execute our new strategy and impending rebranding initiative;
- our inability to further de-lever and position the Company for enhanced growth with certain net proceeds from the completed Lottery business sale and the Pending Divestitures;
- slow growth of new gaming jurisdictions, slow addition of casinos in existing jurisdictions and declines in the replacement cycle of gaming machines;
- risks relating to foreign operations, including anti-corruption laws, fluctuations in currency rates, restrictions on the payment of dividends from earnings, restrictions on the import of products and financial instability, including the potential impact to our business resulting from the continuing uncertainty following the U.
Contacts
Media Relations
Christina Karas +1 702-532-7986
Vice President, Corporate Communications
ckaras@lnw.com
Investor Relations
Jim Bombassei +1 702-532-7643
Senior Vice President, Investor Relations
jbombassei@lnw.com