Light & Wonder, Inc. Reports First Quarter 2023 Results

Delivered Consolidated Revenue Growth of 17% Year-Over-Year with Strong Cash Flows

Achieved Double-Digit Growth Across all Three of our Businesses with 18% Gaming Revenue Growth and Record Revenue in SciPlay and iGaming

Principal Face Value of Debt Outstanding⁽¹⁾ of $3.9 Billion Translating to Net Debt Leverage Ratio⁽²⁾ to 3.1x, Squarely in Targeted Range

Board of Directors Approved Secondary Listing on the Australian Securities Exchange

LAS VEGAS–(BUSINESS WIRE)–Light & Wonder, Inc. (NASDAQ: LNW) (“Light & Wonder,” “L&W,” or the “Company”) today reported results for the first quarter ended March 31, 2023.

We entered 2023 with strong momentum and delivered another quarter of double-digit topline growth with strong cash flows continuing to execute on our strategic plan and progress toward our long-term financial targets. Consolidated revenue grew 17%, driven by growth across all of our businesses, including another quarter of record revenues for SciPlay and iGaming:

• Gaming revenue increased 18% to $419 million compared to the prior year period, primarily driven by continued strength in Gaming machine sales, which increased 53%, and strong performance in Gaming operations and systems.
• SciPlay achieved record revenue of $186 million, an 18% increase compared to the prior year period, driven by the core social casino business, which delivered strong payer metrics and once again outpaced the market and gained share.
• iGaming revenue reached record quarterly revenue of $65 million, a 10% increase from the prior year period, primarily driven by continued growth in the U.S. market.

Matt Wilson, President and Chief Executive Officer of Light & Wonder, said, “We’re off to a strong start in 2023, delivering on all key metrics and once again driving double-digit revenue growth across all three of our businesses. Our strategy and disciplined investments are driving enhanced returns as we continue to develop and execute on our robust product roadmap, building off the strong momentum that we saw in 2022. The teams executed several notable wins and key launches in the quarter, and we have a full pipeline of games that support progress toward our long-term targets. With leading talent, technology and products, we continue to strengthen our position as the leading cross-platform global games company.”

Connie James, Chief Financial Officer of Light & Wonder, added, “We continue to capitalize on the strong growth opportunities that we see in our markets, and drive margin enhancement across the business as we remain focused on operational excellence. This quarter demonstrates Light & Wonder’s favorable financial profile with strong topline growth flowing to the bottom line, and importantly strong cash conversion, enabling us to invest in future sustainable growth. We continue to focus on generating significant cash flow while maintaining our balanced and opportunistic approach to capital management and a healthy balance sheet to enhance value for our shareholders.”

LEVERAGE, CAPITAL RETURN, AND STRATEGY UPDATE

• Net debt leverage ratio⁽¹⁾ of 3.1x, within our targeted net debt leverage ratio⁽¹⁾ range of 2.5x to 3.5x, as of March 31, 2023, a decrease of 0.2x from December 31, 2022.
• Returned $437 million of capital to shareholders through the repurchase of approximately 7.6 million shares of L&W common stock since the initiation of the program through May 4, 2023, representing 58% of total program authorization.
• Preparing for potential Australian Securities Exchange (“ASX”) secondary listing — the Company’s Board of Directors has approved proceeding with a secondary listing on the ASX, in addition to the Company’s existing primary Nasdaq listing. The Board believes there are substantial potential benefits for the Company and its shareholders in pursuing a secondary listing on the ASX, including enhancing the Company’s profile in Australia, one of the leading markets for the Company’s Gaming business, and providing the Company access to new long-term Australian institutional investors that would complement its strong existing base of shareholders in the U.S. and Australia.

SUMMARY RESULTS

Unless otherwise noted, amounts, percentages and discussion included below reflect the results of operations and financial condition of the Company’s continuing operations, which includes its Gaming, SciPlay and iGaming businesses. We have reflected our former Lottery business (disposed during the second quarter of 2022) and Sports Betting business (disposed during the third quarter of 2022) (collectively referred to as the “Divestitures”) as discontinued operations.

First Quarter 2023 Financial Highlights:

• First quarter consolidated revenue was $670 million compared to $572 million, up 17% compared to the prior year period driven by double-digit growth across all of our businesses. Gaming revenue increased 18%, driven by another quarter of robust growth in Gaming machine sales, 53% year-over-year, while both SciPlay and iGaming reached new quarterly records.
• Net income was $27 million compared to a net loss of $67 million in the prior year period, primarily due to higher revenue and operating income as well as lower interest expense in the current period.
• Consolidated AEBITDA, a non-GAAP financial measure defined below, was $249 million, an increase of 23% compared to the prior year period, driven by double-digit growth across all of our businesses and improved margin.
• Net cash provided by operating activities was $185 million compared to combined net cash provided by operating activities of $94 million in the prior year period. The current year period cash flows benefited from lower interest payments coupled with favorable working capital changes primarily due to the timing of disbursements as well as receivables and inventory levels beginning to normalize, while the prior year period reflects cash flows from the Lottery business (which we divested during the second quarter of 2022), which were partially offset by higher payments associated with the strategic transactions.
• Free cash flow, a non-GAAP financial measure defined below, was $74 million compared to combined free cash flow⁽¹⁾ of $(11) million in the prior year period. The current year period free cash flow benefited from lower interest payments and favorable changes in working capital, as described above. The prior year period combined free cash flow was negatively affected by unfavorable changes in working capital accounts, primarily related to the timing of disbursements, including costs associated with the strategic transactions and timing of inventory purchases.
• Net debt leverage ratio, a non-GAAP financial measure defined below, was 3.1x as of March 31, 2023 compared to 3.3x as of December 31, 2022, remaining in our targeted net debt leverage ratio⁽¹⁾ range of 2.5x to 3.5x.

First Quarter 2023 Key Highlights

• Gaming revenue increased 18% to $419 million compared to the prior year period, driven by continued momentum in Gaming machine sales, growing 53%. Gaming operations maintained elevated average daily revenue per unit, while Gaming systems continued strong momentum, growing 8%. Gaming AEBITDA was $206 million, up 20% compared to the prior year period.
• Gaming operation revenues continue to benefit from year-over-year growth in our North American installed base and average daily revenue per unit, as a result of strong content performance and the continued success of our KASCADA^® and MURAL^® cabinets. Our North American premium installed base has grown for the 11^th consecutive quarter, representing 46% of our total installed base mix, while revenue per day remained at elevated levels. Additionally, we continue to see positive momentum with the Kascada Dual Screen and LANDMARK™ 7000 cabinets, validating our continued investment in our R&D engine to drive our long-term growth.
• SciPlay revenue increased 18% to $186 million compared to the prior year period, breaking another record by achieving the highest quarterly revenue ever. Growth was primarily driven by the core social casino business, which delivered strong payer metrics and once again outpaced the market and gained share. SciPlay continued to benefit from key investments that are driving strong engagement and monetization of our players. Payer conversion rates continued strong momentum, while ARPDAU⁽¹⁾ grew 20% year-over-year to a record $0.89, and AMRPPU⁽²⁾ held at elevated levels.
• iGaming revenue increased 10% to $65 million, and AEBITDA was $23 million compared to $21 million in the prior year period. The revenue and AEBITDA increases were primarily driven by continued growth in the U.S. market. The U.S. market delivered 34% year-over-year revenue growth, driven in part by the strong launches of our land-based original content and scaling third party aggregation on our platform. The launch of our live casino in Michigan is pending final regulatory approval, now expected during the second half of the year.
• Consolidated capital expenditures were $53 million in the first quarter of 2023.

Earnings Conference Call

As previously announced, Light and Wonder executive leadership will host a conference call on Tuesday, May 9, 2023, 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/ and click on the webcast link under the Events and Presentations section. To access the call by telephone, please dial: +1 (833) 470-1428 for U.S. or +1 (204) 525-0658 for International and ask to join the Light & Wonder call using conference ID: 348332. A replay of the webcast will be archived in the Investors section on www.lnw.com.

About Light & Wonder

Light & Wonder, Inc. (NASDAQ: LNW) is a global leader in cross-platform games and entertainment. The Company brings together approximately 6,000 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 Securities Exchange Commission (“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. © 2023 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 effects of the COVID-19 pandemic and any resulting unfavorable social, political, economic and financial conditions;
• our inability to successfully execute our strategy and rebranding initiative;
• 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;
• difficulty predicting what impact, if any, new tariffs imposed by and other trade actions taken by the U.S. and foreign jurisdictions could have on our business;
• U.S. and international economic and industry conditions, including increases in benchmark interest rates and the effects of inflation;
• public perception of our response to environmental, social and governance issues;
• changes in, or the elimination of, our share repurchase program;
• resulting pricing variations and other impacts if our common stock is listed to trade on more than one stock exchange;
• level of our indebtedness, higher interest rates, availability or adequacy of cash flows and liquidity to satisfy indebtedness, other obligations or future cash needs;
• inability to further reduce or refinance our indebtedness;
• restrictions and covenants in debt agreements, including those that could result in acceleration of the maturity of our indebtedness;
• competition;
• inability to win, retain or renew, or unfavorable revisions of, existing contracts, and the inability to enter into new contracts;
• the impact of U.K. legislation approving the reduction of fixed-odds betting terminals maximum stakes limit on LBO operators, including the related closure of certain LBO shops;
• inability to adapt to, and offer products that keep pace with, evolving technology, including any failure of our investment of significant resources in our R&D efforts;
• changes in demand for our products and services;
• inability to achieve some or all of the anticipated benefits of SciPlay being a standalone public company;
• dependence on suppliers and manufacturers;
• SciPlay’s dependence on certain key providers;
• ownership changes and consolidation in the gaming industry;
• fluctuations in our results due to seasonality and other factors;
• security and integrity of our products and systems, including the impact of any security breaches or cyber-attacks;
• protection of our intellectual property, inability to license third-party intellectual property and the intellectual property rights of others;
• reliance on or failures in information technology and other systems;
• litigation and other liabilities relating to our business, including litigation and liabilities relating to our contracts and licenses, our products and systems, our employees (including labor disputes), intellectual property, environmental laws and our strategic relationships;
• reliance on technological blocking systems;
• challenges or disruptions relating to the completion of the domestic migration to our enterprise resource planning system;
• laws and government regulations, both foreign and domestic, including those relating to gaming, data privacy and security, including with respect to the collection, storage, use, transmission and protection of personal information and other consumer data, and environmental laws, and those laws and regulations that affect companies conducting business on the internet, including online gambling;
• legislative interpretation and enforcement, regulatory perception and regulatory risks with respect to gaming, especially internet wagering, social gaming and sports wagering;
• changes in tax laws or tax rulings, or the examination of our tax positions;
• opposition to legalized gaming or the expansion thereof and potential restrictions on internet wagering;
• significant opposition in some jurisdictions to interactive social gaming, including social casino gaming and how such opposition could lead these jurisdictions to adopt legislation or impose a regulatory framework to govern interactive social gaming or social casino gaming specifically, and how this could result in a prohibition on interactive social gaming or social casino gaming altogether, restrict our ability to advertise our games, or substantially increase our costs to comply with these regulations;
• expectations of shift to regulated digital gaming or sports wagering;
• inability to develop successful products and services and capitalize on trends and changes in our industries, including the expansion of internet and other forms of digital gaming;
• the continuing evolution of the scope of data privacy and security regulations, and our belief that the adoption of increasingly restrictive regulations in this area is likely within the U.S. and other jurisdictions;
• incurrence of restructuring costs;
• goodwill impairment charges including changes in estimates or judgments related to our impairment analysis of goodwill or other intangible assets;
• stock price volatility;
• failure to maintain adequate internal control over financial reporting;
• dependence on key executives;
• natural events that disrupt our operations, or those of our customers, suppliers or regulators; and
• expectations of growth in total consumer spending on social casino gaming.

Additional information regarding risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated in forward-looking statements is included from time to time in our filings with the SEC, including the Company’s current reports on Form 8-K, quarterly reports on Form 10-Q and its latest Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2022 on March 1, 2023 (including under the headings “Forward Looking Statements” and “Risk Factors”). Forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no and expressly disclaim any obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

You should also note that this press release may contain references to industry market data and certain industry forecasts. Industry market data and industry forecasts are obtained from publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. Although we believe industry information to be accurate, it is not independently verified by us and we do not make any representation as to the accuracy of that information. In general, we believe there is less publicly available information concerning the international gaming, social and digital gaming industries than the same industries in the U.S.

Due to rounding, certain numbers presented herein may not precisely recalculate.

Contacts

COMPANY CONTACTS

Media Relations
Andy Fouché +1 206-697-3678
Vice President, Corporate Communications
media@lnw.com

Investor Relations
Nick Zangari +1 702-532-7614
Senior Vice President, Investor Relations
ir@lnw.com

Read full story here

Fonte BUSINESS WIRE