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)
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.”
(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.
(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 $140 million of capital to shareholders through
the repurchase of approximately 2.4 million shares of common stock
since initiation of the program on March 3, 2022, and through May
6, 2022.
- Invested in key growth opportunities, both organically
and inorganically in content and digital markets to accelerate
growth. Organic investments include R&D, capex, the launch and
investment in our new Las Vegas iGaming studio, and expansion into
a live dealer market. On April 29, 2022, we acquired Playzido, a
targeted acquisition which will fuel our iGaming content offering,
and in March SciPlay acquired Alictus, a proven casual game
developer as SciPlay rapidly expands in the casual market.
- Hosting an investor day on May 17th in New York City, to
provide an update on our strategy and progress on key
initiatives.
SUMMARY RESULTS
We have reflected our Lottery and Sports Betting businesses as
discontinued operations, for all periods presented. Unless
otherwise noted, amounts, percentages and discussion included below
reflect the results of operations and financial condition from the
Company’s continuing operations which includes its Gaming, SciPlay
and iGaming businesses.
Three Months Ended
($ 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.K.’s withdrawal from the European Union;
- 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;
- level of our indebtedness, higher interest rates, availability
or adequacy of cash flows and liquidity to satisfy indebtedness,
other obligations or future cash needs;
- the transition from LIBOR to SOFR, which may adversely affect
interest rates;
- inability to reduce or refinance our indebtedness;
- restrictions and covenants in debt agreements, including those
that could result in acceleration of the maturity of our
indebtedness;
- 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 benefit from, and risks associated with, strategic
equity investments and relationships;
- 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;
- 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 and 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, 2021 on March 1, 2022 (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 agree or total to the previously reported amounts.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited, in millions,
except per share amounts)
Three Months Ended
March 31,
2022
2021
Revenue:
Services
$
431
$
364
Product sales
141
89
Total revenue
572
453
Operating expenses:
Cost of services(1)
90
87
Cost of product sales(1)
70
40
Selling, general and administrative
175
159
Research and development
53
45
Depreciation, amortization and
impairments
108
97
Restructuring and other
36
21
Total operating expenses
532
449
Operating income
40
4
Other (expense) income:
Interest expense
(116
)
(121
)
Gain on remeasurement of debt
7
25
Other income, net
5
7
Total other expense, net
(104
)
(89
)
Net loss from continuing operations before
income taxes
(64
)
(85
)
Income tax expense
(3
)
(3
)
Net loss from continuing operations
(67
)
(88
)
Net income from discontinued operations,
net of tax
95
79
Net income (loss)
28
(9
)
Less: Net income attributable to
noncontrolling interest
2
6
Net income (loss) attributable to
L&W
$
26
$
(15
)
Per Share - Basic:
Net loss from continuing operations
$
(0.72
)
$
(0.98
)
Net income from discontinued
operations
0.98
0.82
Net income (loss) attributable to
L&W
$
0.26
$
(0.16
)
Per Share - Diluted:
Net loss from continuing operations
$
(0.72
)
$
(0.98
)
Net income from discontinued
operations
0.98
0.82
Net income (loss) attributable to
L&W
$
0.26
$
(0.16
)
Weighted average number of shares used in
per share calculations:
Basic shares
97
95
Diluted shares
97
95
(1) Excludes depreciation and
amortization.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited, in millions except
for common shares outstanding)
March 31,
December 31,
2022
2021
Assets:
Cash and cash equivalents
$
496
$
585
Restricted cash
48
41
Receivables, net of allowance for credit
losses $48 and $52, respectively
431
423
Inventories
113
98
Prepaid expenses, deposits and other
current assets
110
88
Assets of businesses held for sale
558
497
Total current assets
1,756
1,732
Restricted cash
9
9
Receivables, net of allowance for credit
losses $2 and $2, respectively
17
17
Property and equipment, net
197
213
Operating lease right-of-use assets
50
51
Goodwill
2,978
2,892
Intangible assets, net
893
946
Software, net
105
117
Deferred income taxes
344
349
Other assets
86
80
Assets of businesses held for sale
1,517
1,477
Total assets
$
7,952
$
7,883
Liabilities and Stockholders’
Deficit:
Current portion of long-term debt
$
44
$
44
Accounts payable
198
204
Accrued liabilities
385
444
Liabilities of businesses held for
sale
300
282
Total current liabilities
927
974
Deferred income taxes
42
35
Operating lease liabilities
40
40
Other long-term liabilities
155
170
Long-term debt, excluding current
portion
8,789
8,646
Liabilities of businesses held for
sale
136
124
Total stockholders’ deficit(1)(2)
(2,137
)
(2,106
)
Total liabilities and stockholders’
deficit
$
7,952
$
7,883
(1) Includes $152 million and $150 million
in noncontrolling interest as of March 31, 2022 and December 31,
2021, respectively.
(2) Common shares outstanding as of May 5,
2022 were 95,665,390.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, in
millions)
Three Months Ended
March 31,
2022
2021
Cash flows from operating activities:
Net income (loss)
$
28
$
(9
)
Less: Income from discontinued operations,
net of tax
(95
)
(79
)
Adjustments to reconcile net loss from
continuing operations to net cash (used in) provided by operating
activities from continuing operations
121
96
Changes in working capital accounts,
excluding the effects of acquisitions
(72
)
17
Changes in deferred income taxes and
other
4
—
Net cash (used in) provided by operating
activities from continuing operations
(14
)
25
Net cash provided by operating activities
from discontinued operations
108
98
Net cash provided by operating
activities
94
123
Cash flows from investing activities:
Capital expenditures
(43
)
(35
)
Acquisitions of businesses, net of cash
acquired
(108
)
—
Other
—
1
Net cash used in investing activities from
continuing operations
(151
)
(34
)
Net cash used in investing activities from
discontinued operations
(25
)
(27
)
Net cash used in investing activities
(176
)
(61
)
Cash flows from financing activities:
Proceeds (payments) of long-term debt,
net
150
(110
)
Payments of debt issuance and deferred
financing and offering costs
(1
)
—
Payments on license obligations
(19
)
(12
)
Purchase of treasury stock
(51
)
—
Net redemptions of common stock under
stock-based compensation plans and other
(25
)
(13
)
Net cash provided by (used in) financing
activities from continuing operations
54
(135
)
Net cash used in financing activities from
discontinued operations
(2
)
(4
)
Net cash provided by (used in) financing
activities
52
(139
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(1
)
(1
)
Decrease in cash, cash equivalents and
restricted cash
(31
)
(78
)
Cash, cash equivalents and restricted
cash, beginning of period
701
1,143
Cash, cash equivalents and restricted
cash, end of period
670
1,065
Less: Cash, cash equivalents and
restricted cash of discontinued operations
117
117
Cash, Cash equivalents and restricted cash
of continuing operations, end of period
$
553
$
948
Supplemental cash flow information:
Cash paid for interest
$
117
$
123
Income taxes paid
9
7
Distributed earnings from equity
investments
1
4
Supplemental non-cash transactions:
Non-cash interest expense
$
6
$
6
LIGHT & WONDER, INC. AND
SUBSIDIARIES
RECONCILIATION OF CONSOLIDATED
AEBITDA - CONTINUING OPERATIONS, AEBITDA FROM DISCONTINUED
OPERATIONS, COMBINED AEBITDA, SUPPLEMENTAL BUSINESS SEGMENT DATA,
AND COMBINED REVENUE
(Unaudited, in
millions)
Three Months Ended March
31,
2022
2021
Reconciliation of Net Income (Loss)
Attributable to L&W to Consolidated AEBITDA - Continuing
Operations
Net income (loss) attributable to
L&W
$
26
$
(15
)
Net income attributable to noncontrolling
interest
2
6
Net income from discontinued operations,
net of tax
(95
)
(79
)
Net loss from continuing operations
(67
)
(88
)
Restructuring and other(1)
36
21
Depreciation, amortization and
impairments
108
97
Other income, net
(2
)
(6
)
Interest expense
116
121
Income tax expense
3
3
Stock-based compensation
15
19
Gain on remeasurement of debt
(7
)
(25
)
Consolidated AEBITDA - continuing
operations
$
202
$
142
Reconciliation of Net Income from
Discontinued Operations, Net of Tax to AEBITDA from Discontinued
Operations
Net income from discontinued operations,
net of tax
$
95
$
79
Income tax expense
10
—
Depreciation, amortization and
impairments
—
26
EBITDA from equity investments(2)
15
19
Earnings from equity investments
(4
)
(8
)
Stock-based compensation and other,
net
2
11
AEBITDA from discontinued
operations(3)
$
118
$
127
EBITDA from equity investments -
continuing operations(2)
2
1
Combined AEBITDA(4)
$
322
$
270
Supplemental Business Segment Data -
Continuing Operations
Business segments AEBITDA - continuing
operations
Gaming
$
171
$
107
SciPlay
44
46
iGaming
21
21
Total business segments AEBITDA -
continuing operations
236
174
Corporate and other(5)(6)
(34
)
(32
)
Consolidated AEBITDA - continuing
operations
$
202
$
142
Reconciliation of Combined
Revenue
Continuing operations revenue
$
572
$
453
Discontinued operations revenue
288
276
Combined revenue
$
860
$
729
(1) Refer to the Consolidated AEBITDA -
continuing operations and AEBITDA from discontinued operations
definitions below for a description of items included in
restructuring and other.
(2) EBITDA from equity investments is a
non-GAAP financial measure reconciled to the most directly
comparable GAAP measure in the accompanying supplemental tables at
the end of this release.
(3) AEBITDA from discontinued operations,
a non-GAAP measure, is derived based on the historical records and
includes only those direct costs that are allocated to discontinued
operations. See below for further description and disclaimers
associated with this non-GAAP measure.
(4) Combined AEBITDA consists of
Consolidated AEBITDA - continuing operations, AEBITDA from
discontinued operations and EBITDA from equity investments included
in continuing operations. Refer to non-GAAP financial measure
definitions below for further details.
(5) Includes amounts not allocated to the
business segments (including corporate costs) and other
non-operating expenses (income).
(6) Represents the current corporate cost
structure that was not historically allocated to our business
segments.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
CONTINUING OPERATIONS
SUPPLEMENTAL INFORMATION - SEGMENT KEY PERFORMANCE INDICATORS AND
SUPPLEMENTAL FINANCIAL DATA
(Unaudited, in millions,
except unit and per unit data or as otherwise noted)
Three Months Ended
March 31, 2022
March 31, 2021
December 31, 2021
Gaming Business Segment Supplemental
Financial Data:
Revenue by line of
business:
Gaming operations
$
155
$
113
$
156
Gaming machine sales
103
55
111
Gaming systems
51
42
58
Table products
46
34
47
Total revenue
$
355
$
244
$
372
Gaming
Operations:
U.S. and Canada:
Installed base at period end
30,359
29,809
30,514
Average daily revenue per unit
$
43.39
$
35.45
$
43.50
International:(1)
Installed base at period end
29,762
31,703
29,375
Average daily revenue per unit
$
13.72
$
3.03
$
13.90
Gaming Machine
Sales:
U.S. and Canada new unit shipments
3,382
1,943
3,489
International new unit shipments
1,914
656
2,140
Total new unit shipments
5,296
2,599
5,629
Average sales price per new unit
$
17,099
$
16,622
$
17,392
Gaming Machine Unit
Sales Components:
U.S. and Canada unit shipments:
Replacement units
3,152
1,623
3,334
Casino opening and expansion units
230
320
155
Total unit shipments
3,382
1,943
3,489
International unit shipments:
Replacement units
1,914
656
1,584
Casino opening and expansion units
—
—
556
Total unit shipments
1,914
656
2,140
SciPlay Business Segment Supplemental
Financial Data:
Revenue:
Mobile in-app purchases
$
140
$
133
$
137
Web in-app purchases and other(2)
18
18
17
Total revenue
$
158
$
151
$
154
In-App
Purchases:
Mobile penetration(3)
90
%
88
%
89
%
Average MAU(4)
6.3
6.7
5.9
Average DAU(5)
2.3
2.5
2.3
ARPDAU(6)
$
0.74
$
0.67
$
0.74
Average MPU(7)
0.6
0.5
0.5
AMRPPU(8)
$
92.45
$
92.80
$
98.38
Payer Conversion Rate(9)
8.9
%
8.1
%
8.9
%
iGaming Business
Segment Supplemental Data:
Wagers processed through OGS (in
billions)
$
17.5
$
16.9
$
17.2
(1) Excludes the impact of game content
licensing revenue.
(2) Other primarily consists of
advertising revenue which was not material for the periods
presented.
(3) Mobile penetration is defined as the
percentage of SciPlay revenue generated from mobile platforms.
(4) MAU = Monthly Active Users is a count
of visitors to our sites during a month. An individual who plays
multiple games or from multiple devices may, in certain
circumstances, be counted more than once. However, we use
third-party data to limit the occurrence of multiple counting.
(5) DAU = Daily Active Users is a count of
visitors to our sites during a day. An individual who plays
multiple games or from multiple devices may, in certain
circumstances, be counted more than once. However, we use
third-party data to limit the occurrence of multiple counting.
(6) ARPDAU = Average revenue per DAU is
calculated by dividing revenue for a period by the DAU for the
period by the number of days for the period.
(7) MPU = Monthly Paying Users is the
number of individual users who made an in-game purchase during a
particular month.
(8) AMRPPU = Average Monthly Revenue Per
Paying User is calculated by dividing average monthly revenue by
average MPUs for the applicable time period.
(9) Payer conversion rate is calculated by
dividing average MPU for the period by the average MAU for the same
period.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
(Unaudited, in millions,
except for ratios)
RECONCILIATION OF NET INCOME
ATTRIBUTABLE TO L&W TO CONSOLIDATED AEBITDA - CONTINUING
OPERATIONS
Twelve Months Ended
March 31, 2022
December 31, 2021
December 31, 2020
Net income (loss) attributable to
L&W
$
412
$
371
$
(569
)
Net income attributable to noncontrolling
interest
15
19
21
Net income from discontinued operations,
net of tax
(382
)
(366
)
(253
)
Net income (loss) from continuing
operations
45
24
(801
)
Restructuring and other
182
167
56
Depreciation, amortization and
impairments
409
398
449
Goodwill impairment
—
—
54
Other (income) expense, net
(24
)
(28
)
9
Interest expense
473
478
503
Income tax benefit
(318
)
(318
)
(3
)
Stock-based compensation
109
113
56
(Gain) loss on remeasurement of debt and
other
(23
)
(41
)
51
Consolidated AEBITDA - continuing
operations
$
853
$
793
$
374
RECONCILIATION OF NET INCOME
FROM DISCONTINUED OPERATIONS, NET OF TAX TO AEBITDA FROM
DISCONTINUED OPERATIONS AND COMBINED AEBITDA
Twelve Months Ended
March 31, 2022
December 31, 2021
December 31, 2020
Net income from discontinued operations,
net of tax
$
382
$
366
$
253
Income tax expense
81
72
7
Restructuring and other
10
10
11
Depreciation, amortization and
impairments
53
79
105
EBITDA from equity investments
76
80
30
(Earnings) loss from equity
investments
(38
)
(42
)
9
Stock-based compensation and other,
net
(43
)
(35
)
4
AEBITDA from discontinued
operations(1)
$
521
$
530
$
419
EBITDA from equity investments -
continuing operations(2)
9
8
7
Combined AEBITDA(2)
$
1,383
$
1,331
$
800
RECONCILIATION OF PRINCIPAL
FACE VALUE OF DEBT OUTSTANDING TO NET DEBT AND NET DEBT LEVERAGE
RATIO
As of
March 31, 2022
December 31, 2021
December 31, 2020
Combined AEBITDA(2)
$
1,383
$
1,331
$
800
Total debt
$
8,833
$
8,690
$
9,303
Add: Unamortized debt discount/premium and
deferred financing costs, net
77
82
104
Add: Impact of exchange rate(3)
73
62
7
Less: Debt not requiring cash repayment
and other
(3
)
(4
)
(7
)
Principal face value of debt
outstanding
8,980
8,830
9,407
Less: Combined Cash and cash
equivalents(4)
582
629
1,016
Net debt
$
8,398
$
8,201
$
8,391
Net debt leverage ratio
6.1
6.2
10.5
Euro to USD exchange rate at reporting
date
1.11
1.13
1.22
Euro to USD exchange rate at issuance
1.24
1.24
1.24
(1) AEBITDA from discontinued operations,
a non-GAAP measure, is derived based on the historical records and
includes only those direct costs that are allocated to discontinued
operations. See below for further description and disclaimers
associated with this non-GAAP measure.
(2) Combined AEBITDA consists of
Consolidated AEBITDA - continuing operations, AEBITDA from
discontinued operations and EBITDA from equity investments included
in continuing operations. Refer to non-GAAP financial measure
definitions below for further details.
(3) Exchange rate impact is the impact of
translating our outstanding 2026 Secured Euro Notes and 2026
Unsecured Euro Notes translated at constant foreign exchange rate
at issuance of these notes as compared to the current exchange
rate.
(4) Includes cash and cash equivalents of
both continuing operations and discontinued operations, as the
combined amount is available for debt payments.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
(Unaudited, in millions,
except for ratios)
RECONCILIATION OF NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW -
CONTINUING OPERATIONS AND COMBINED FREE CASH FLOW
Three Months Ended March
31,
2022
2021
Continuing Operations
Discontinued
Operations(2)
Combined(3)
Continuing Operations
Discontinued
Operations(2)
Combined(3)
Operations (exc. interest and
taxes)
Cash interest and
taxes(1)
Total
Operations (exc. interest and
taxes)
Cash interest and
taxes(1)
Total
Net cash (used in) provided by operating
activities
$
110
$
(124
)
$
(14
)
$
108
$
94
$
154
$
(129
)
$
25
$
98
$
123
Less: Capital expenditures
(43
)
—
(43
)
(25
)
(68
)
(35
)
—
(35
)
(15
)
(50
)
Less: Distributions from equity method
investments, net of additions
—
—
—
—
—
1
—
1
(10
)
(9
)
Less: Payments on license obligations
(19
)
—
(19
)
(2
)
(21
)
(12
)
—
(12
)
(1
)
(13
)
(Less) add: Change in restricted cash
impacting working capital
(7
)
—
(7
)
(9
)
(16
)
5
—
5
24
29
Free cash flow
$
41
$
(124
)
$
(83
)
$
72
$
(11
)
$
113
$
(129
)
$
(16
)
$
96
$
80
(1) Represents cash taxes and cash
interest paid on our existing debt, which has not historically been
allocated to our business segments. We present this column to
provide the impact of our current debt structure on our operating
cash flows from continuing operations to provide greater
comparability to cash flows generated by our continuing and
discontinued operations.
(2) Free cash flow from discontinued
operations, a non-GAAP measure, is derived based on the historical
records and includes only those direct cash flows that are
allocated to discontinued operations. See below for further
description and disclaimers associated with this non-GAAP
measure.
(3) Combined Free cash flow consists of
Free cash flow (representing Free cash flow from continuing
operations) and Free cash flow from discontinued operations. Refer
to non-GAAP financial measure definitions below for further
details.
RECONCILIATION OF EARNINGS
FROM EQUITY INVESTMENTS TO EBITDA FROM EQUITY INVESTMENTS AND
COMBINED EBITDA FROM EQUITY INVESTMENTS
Three Months Ended March
31,
2022
2021
Continuing Operations
Discontinued
Operations
Continuing Operations
Discontinued
Operations
Earnings from equity investments
$
1
$
4
$
1
$
8
Add: Income tax expense
—
4
—
4
Add: Depreciation, amortization and
impairments
—
7
—
7
Add: Interest income, net and other
1
—
—
—
EBITDA from equity investments
$
2
$
15
$
1
$
19
Combined EBITDA from equity
investments(1)
$
17
$
20
(1) Combined EBITDA from equity
investments consists of EBITDA from both discontinued and
continuing operations equity investments.
Twelve Months Ended
March 31, 2022
December 31, 2021
December 31, 2020
Continuing Operations
Discontinued
Operations
Continuing Operations
Discontinued
Operations
Continuing Operations
Discontinued
Operations
Earnings (loss) from equity
investments
$
5
$
38
$
5
$
42
$
3
$
(9
)
Add: Income tax expense
—
11
—
10
—
3
Add: Depreciation, amortization and
impairments
1
31
1
31
1
31
Add: Interest income, net and other
3
(4
)
2
(3
)
3
5
EBITDA from equity investments
$
9
$
76
$
8
$
80
$
7
$
30
Combined EBITDA from equity
investments(1)
$
85
$
88
$
37
(1) Combined EBITDA from equity
investments consists of EBITDA from both discontinued and
continuing operations equity investments.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
(Unaudited, in millions,
except for ratios)
PRINCIPAL DEBT BALANCE
SUPPLEMENTAL INFORMATION
Final Maturity
Rate(s)
Principal Amount of
Outstanding Debt as of March 31, 2022(1)
April 14, 2022 Refinancing
Impact(1)
Adjusted Outstanding Principal
Value(1)
Senior Secured Credit Facilities:
SGI Revolver
2024
variable
$
160
$
(160
)
$
—
SGI Term Loan B-5
2024
variable
4,008
(4,008
)
—
New Term Loan
2029
variable
—
2,200
2,200
SGI Senior Notes:
2025 Secured Notes(2)
2025
5.000
%
1,250
(1,250
)
—
2026 Secured Euro Notes
2026
3.375
%
361
(361
)
—
2025 Unsecured Notes
2025
8.625
%
550
—
550
2026 Unsecured Euro Notes
2026
5.500
%
278
(278
)
—
2026 Unsecured Notes
2026
8.250
%
1,100
(1,100
)
—
2028 Unsecured Notes
2028
7.000
%
700
—
700
2029 Unsecured Notes
2029
7.250
%
500
—
500
Other(3)
2023
4.089
%
3
—
3
Total long-term debt outstanding
$
8,910
$
(4,957
)
$
3,953
(1) Principal amount of outstanding debt
as of March 31, 2022 represents the outstanding principal value of
debt balances that conform to the presentation found in Note 11 to
the Consolidated Financial Statements in our March 31, 2022 Form
10-Q. Adjusted outstanding principal value represents the principal
amount of outstanding debt as of March 31, 2022 adjusted for the
impact of the April refinancing transactions, $98 million of SGI
Term Loan B-5 principal reduction and $160 million pay down of the
SGI Revolver related to 2022 payments before the refinancing
transactions.
(2) We entered into certain cross-currency
interest rate swap agreements to achieve more attractive interest
rates by effectively converting $460 million of the fixed-rate,
U.S. Dollar-denominated 2025 Secured Notes, including the
semi-annual interest payments through October 2023, to a fixed-rate
Euro-denominated debt, with a fixed annual weighted average
interest rate of approximately 2.946%.
(3) Primarily comprised of certain revenue
transactions presented as debt in accordance with ASC 470.
RECONCILIATION OF ADJUSTED NET
DEBT REFLECTING REFINANCING TRANSACTIONS AND THE LOTTERY BUSINESS
SALE & ADJUSTED NET DEBT LEVERAGE RATIO REFLECTING REFINANCING
TRANSACTIONS AND THE LOTTERY BUSINESS SALE
March 31, 2022
Refinancing Transactions and
Lottery Business Sale Adjustments
Adjusted Net Debt Reflecting
Refinancing Transactions and the Lottery Business Sale &
Adjusted Net Debt Leverage Ratio Reflecting Refinancing
Transactions and the Lottery Business Sale
Combined AEBITDA(1)
$
1,383
$
(496
)
(2
)
$
887
Total debt
$
8,833
$
8,833
Add: Unamortized debt discount/premium and
deferred financing costs, net
77
77
Add: Impact of exchange rate(3)
73
73
Less: Debt not requiring cash repayment
and other
(3
)
(3
)
Principal face value of debt
outstanding
$
8,980
$
(5,030
)
(4
)
$
3,950
Less: Combined Cash and cash
equivalents(5)
582
54
(6
)
636
Net debt
$
8,398
$
3,314
Net debt leverage ratio
6.1
3.7
(1) Combined AEBITDA consists of
Consolidated AEBITDA - continuing operations, AEBITDA from
discontinued operations and EBITDA from equity investments included
in continuing operations. Refer to “Reconciliation of Net Income
(Loss) Attributable to L&W to Consolidated AEBITDA - Continuing
Operations” above and non-GAAP financial measure definitions below
for further details.
(2) Adjusted for Lottery business
discontinued operations and equity investments included in
continuing operations.
(3) Impact of exchange rate is the impact
of translating our outstanding 2026 Secured Euro Notes and 2026
Unsecured Euro Notes, translated at constant foreign exchange rate
at issuance of these notes.
(4) Represents a reduction of principal
amount of outstanding debt as of March 31, 2022 for the impact of
April 14, 2022 refinancing transactions including principal
reductions related to 2022 payments before the refinancing
transactions. Refer to the Principal Debt Balance Supplemental
Information table above.
(5) As of March 31, 2022 includes cash and
cash equivalents of both continuing operations and discontinued
operations, as the combined amount is available for debt
payments.
(6) Consists of $104 million in proceeds
expected for the 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, subject to customary working capital
adjustments and is less of $50 million of cash and cash equivalents
of the Lottery Business as of March 31, 2022.
Discontinued Operations
On September 27, 2021, we entered into a definitive agreement to
sell our Sports Betting business to Endeavor Group Holdings, Inc.
in a cash and stock transaction, subject to applicable regulatory
approvals and other customary conditions. On October 27, 2021, we
entered into a definitive agreement to sell our Lottery business to
Brookfield Business Partners L.P. together with its institutional
partners in a cash transaction, subject to applicable regulatory
approvals and customary closing conditions.
On April 4, 2022 we completed sale of the Lottery Business, with
the exception of the Austria Business, to Brookfield Business
Partners L.P. 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 conditions.
Accordingly, the financial results for our Lottery business and
the Sports Betting business presented in the Consolidated
Statements of Operations presented herein have been reclassified to
discontinued operations and prior period Lottery and Sports Betting
balance sheet balances have been reclassified to the Asset and
Liabilities held for sale lines on the Condensed Consolidated
Balance Sheet presented herein in accordance with Accounting
Standard Codification 205-20, Presentation of Financial Statements
- Discontinued Operations.
We report our operations in three business segments—Gaming,
SciPlay and iGaming—representing our different products and
services.
Non-GAAP Financial Measures
The Company’s management uses the following non-GAAP financial
measures in conjunction with GAAP financial measures: Consolidated
AEBITDA (representing continuing operations), AEBITDA from
discontinued operations, Combined AEBITDA, Free cash flow
(representing continuing operations), Free cash flow from
discontinued operations, Combined free cash flow, EBITDA from
equity investments included in discontinued operations, Net debt
and Net debt leverage ratio, Adjusted net debt reflecting
refinancing transactions and the Lottery Business sale and Adjusted
net debt leverage ratio reflecting refinancing transactions and the
Lottery Business sale and Adjusted outstanding debt (each, as
described more fully below). These non-GAAP financial measures are
presented as supplemental disclosures. They should not be
considered in isolation of, as a substitute for, or superior to,
the financial information prepared in accordance with GAAP, and
should be read in conjunction with the Company’s financial
statements filed with the SEC. The non-GAAP financial measures used
by the Company may differ from similarly titled measures presented
by other companies.
Specifically, the Company’s management uses Consolidated AEBITDA
to, among other things: (i) monitor and evaluate the performance of
the Company’s continuing operations; (ii) facilitate management’s
internal and external comparisons of the Company’s consolidated
historical operating performance; and (iii) analyze and evaluate
financial and strategic planning decisions regarding future
operating investments and operating budgets.
In addition, the Company’s management uses Consolidated AEBITDA
to facilitate management’s external comparisons of the Company’s
consolidated results from continuing operations to the historical
operating performance of other companies that may have different
capital structures and debt levels.
The Company’s management uses Adjusted outstanding debt, Net
debt and Net debt leverage ratio in monitoring and evaluating the
Company’s overall liquidity, financial flexibility and leverage and
management uses Adjusted Net debt and Adjusted Net debt leverage
ratio as supplemental information reflecting impact of refinancing
transactions and the Lottery Business sale occurring subsequent to
March 31, 2022.
As described in this earning release, the Company divested its
Lottery business (excluding the Austria Business) and is in the
process of divesting its Sports Betting businesses and as such,
historical financial information for this business is classified as
discontinued operations, as described above. The Company’s
management believes that Combined AEBITDA and Combined free cash
flow are useful during the period until the disposition occurs as
they provide management and investors with information regarding
the Company’s combined financial condition and operating
performance under the structure as of March 31, 2022, including for
prior period comparisons, as the Company is finalizing the
divestiture and transforming the Company’s strategy.
Additionally, as the business held for sale is still subject to
our debt agreements, the Company uses Combined AEBITDA in
determining its debt compliance as required under its debt
covenants. In addition, as these entities are still consolidated,
Combined free cash flow provides greater visibility into cash
available for the continuing operations to use in investing and
financing decisions as this Free cash flow remains available for
such decisions.
The Company’s management believes that these non-GAAP financial
measures are useful as they provide management and investors with
information regarding the Company’s financial condition and
operating performance that is an integral part of management’s
reporting and planning processes. In particular, the Company’s
management believes that Consolidated AEBITDA and Combined AEBITDA
are helpful because these non-GAAP financial measures eliminate the
effects of restructuring, transaction, integration or other items
that management believes are less indicative of the ongoing
underlying performance of continuing operations or on a combined
basis, (as more fully described below) and are better evaluated
separately. Moreover, management believes EBITDA from equity
investments included in discontinued operations is useful to
investors because the Company’s Lottery business is conducted
through a number of equity investments, and this measure eliminates
financial items from the equity investees’ earnings that management
believes have less bearing on the equity investees’ performance.
Management believes that Free cash flow and Combined free cash flow
provide useful information regarding the Company’s liquidity and
its ability to service debt and fund investments.
Management also believes that Free cash flow and Combined free
cash flow are useful for investors because they provide investors
with important perspectives on the cash available for debt
repayment and other strategic measures, after making necessary
capital investments in property and equipment, necessary license
payments to support the ongoing business operations, adjustments
for changes in restricted cash impacting working capital and taking
into account cash flows relating to the Company’s equity
investments.
Additionally, management believes that AEBITDA from discontinued
operations and Free cash flow from discontinued operations provide
useful information regarding the Company’s operations that are in
the process of being divested and provide the impact of those
businesses on the overall financial results for the periods
presented as they currently remain under the current structure of
the Company. These non-GAAP measures are derived based on the
historical records and include only those direct costs that are
allocated to discontinued operations and as such do not include all
of the expenses that would have been incurred by these businesses
as a standalone company or other Corporate and shared allocations
and such differences might be material.
Consolidated AEBITDA (representing AEBITDA from continuing
operations)
Consolidated AEBITDA, as used herein, is a non-GAAP financial
measure that is presented as a supplemental disclosure of the
Company’s continuing operations and is reconciled to net income
(loss) from continuing operations as the most directly comparable
GAAP measure, as set forth in the schedule titled “Reconciliation
of Net Income (Loss) Attributable to L&W to Consolidated
AEBITDA - Continuing Operations.” Consolidated AEBITDA should not
be considered in isolation of, as a substitute for, or superior to,
the consolidated financial information prepared in accordance with
GAAP, and should be read in conjunction with the Company's
financial statements filed with the SEC. Consolidated AEBITDA may
differ from similarly titled measures presented by other companies.
See the Gaming business segment AEBITDA change above also impacting
the definition and calculation of Consolidated AEBITDA.
Consolidated AEBITDA for the prior comparable periods has been
recast to reflect this change.
Consolidated AEBITDA is reconciled to Net income (loss)
attributable to L&W and includes the following adjustments: (1)
Net income attributable to noncontrolling interest; (2) Net income
from discontinued operations, net of tax; (3) Restructuring and
other, which includes charges or expenses attributable to: (i)
employee severance; (ii) management restructuring and related
costs; (iii) restructuring and integration; (iv) cost savings
initiatives; (v) major litigation; and (vi) acquisition costs and
other unusual items; (4) Depreciation, amortization and impairment
charges and Goodwill impairments; (5) change in fair value of
investments and Gain on remeasurement of debt; (6) Interest
expense; (7) Income tax expense; (8) Stock-based compensation; and
(9) Other income, net including foreign currency (gains) and
losses, and earnings from equity investments. AEBITDA is presented
exclusively as our segment measure of profit or loss.
AEBITDA from Discontinued Operations
AEBITDA from discontinued operations, as used herein, is a
non-GAAP financial measure that is presented as a supplemental
disclosure for the Company’s discontinued operations and is
reconciled to net income from discontinued operations, net of tax
as the most directly comparable GAAP measure, as set forth in the
schedule titled “Reconciliation of Net Income from Discontinued
Operations, Net of Tax to AEBITDA from Discontinued Operations.”
AEBITDA from discontinued operations should not be considered in
isolation of, as a substitute for, or superior to, the consolidated
financial information prepared in accordance with GAAP, and should
be read in conjunction with the Company's financial statements
filed with the SEC. AEBITDA from discontinued operations may differ
from similarly titled measures presented by other companies.
AEBITDA from discontinued operations is reconciled to Net income
from discontinued operations, net of tax and includes the following
adjustments: (1) Restructuring and other, which includes charges or
expenses attributable to: (i) employee severance; (ii) management
restructuring and related costs; (iii) restructuring and
integration; (iv) cost savings initiatives; (v) major litigation;
and (vi) acquisition costs and other unusual items; (2)
Depreciation, amortization and impairment charges and Goodwill
impairments; (3) Income tax expense; and (4) Stock-based
compensation and other, net. In addition to the preceding
adjustments, we exclude Earnings from equity investments and add
(without duplication) discontinued operations pro rata share of
EBITDA from equity investments, which represents their share of
earnings (whether or not distributed) before income tax expense,
depreciation and amortization expense, and interest expense, net of
our joint ventures and minority investees, which is included in our
calculation of AEBITDA from discontinued operations.
Combined AEBITDA
Combined AEBITDA, as used herein, is a non-GAAP financial
measure that combines Consolidated AEBITDA (representing our
continuing operations), AEBITDA from discontinued operations and
EBITDA from equity investments included in continuing operations
and is presented as a supplemental disclosure. Combined AEBITDA
should not be considered in isolation of, as a substitute for, or
superior to, the consolidated financial information prepared in
accordance with GAAP, and should be read in conjunction with the
Company's financial statements filed with the SEC. Combined AEBITDA
may differ from similarly titled measures presented by other
companies.
Free Cash Flow - Continuing Operations
Free cash flow, as used herein, represents net cash provided by
operating activities from continuing operations less total capital
expenditures, less payments on license obligations, less
contributions to equity method investments plus distributions of
capital from equity investments, and adjusted for changes in
restricted cash impacting working capital. Free cash flow is a
non-GAAP financial measure that is presented as a supplemental
disclosure for illustrative purposes only and is reconciled to net
cash provided by operating activities, the most directly comparable
GAAP measure, in a schedule above and representing Free cash flows
of our continuing operations.
Free Cash Flow from Discontinued Operations
Free cash flow from discontinued operations, as used herein,
represents net cash provided by operating activities from
discontinued operations less total capital expenditures, less
payments on license obligations, less contributions to equity
method investments plus distributions of capital from equity
investments, and adjusted for changes in restricted cash impacting
working capital. Free cash flow from discontinued operations is a
non-GAAP financial measure that is presented as a supplemental
disclosure for illustrative purposes only and is reconciled to net
cash provided by operating activities from discontinued operations,
the most directly comparable GAAP measure, in a schedule above.
Combined Free Cash Flow
Combined free cash flow, as used herein, represents a non-GAAP
financial measure that combines Free cash flows from continuing
operations and Free cash flows from discontinued operations and is
presented as a supplemental disclosure for illustrative purposes
only.
EBITDA from Equity Investments
EBITDA from equity investments, as used herein, represents our
share of earnings (loss) (whether or not distributed to us) plus
income tax expense, depreciation and amortization expense
(inclusive of amortization of payments made to customers for LNS),
interest (income) expense, net, and other non-cash and unusual
items from our joint ventures and minority investees. EBITDA from
equity investments is a non-GAAP financial measure that is
presented as supplemental disclosure for illustrative purposes only
and is reconciled to earnings (loss) of equity investments, the
most directly comparable GAAP measure, in a schedule above.
Net Debt and Net Debt Leverage Ratio
Net debt is defined as total principal face value of debt
outstanding, the most directly comparable GAAP measure, less
combined cash and cash equivalents. Principal face value of debt
outstanding includes the face value of debt issued under Senior
Secured Credit Facilities, Senior Notes and Subordinated Notes,
which are all described in Note 15 of the Company's Annual Report
on Form 10-K for the year ended December 31, 2021 and in Note 11 of
the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2022, but it does not include other long term obligations
of $3 million primarily comprised of certain revenue transactions
presented as debt in accordance with ASC 470. In addition,
principal face value of debt outstanding with respect to the 2026
Secured Euro Notes and 2026 Unsecured Euro Notes are translated at
the constant foreign exchange rate at issuance of these notes as
those amounts remain payable at the original issuance amounts in
Euro. Net debt leverage ratio, as used herein, represents Net debt
divided by Combined AEBITDA (as defined above). The forward-looking
non-GAAP financial measure targeted long-term net debt leverage
ratio is presented on a supplemental basis and does not reflect
Company guidance. We are not providing a forward-looking
quantitative reconciliation of targeted long-term net debt leverage
ratio to the most directly comparable GAAP measure because we are
unable to predict with reasonable certainty the ultimate outcome of
certain significant items without unreasonable effort. These items
are uncertain, depend on various factors, and could have a material
impact on GAAP reported results for the relevant period.
Adjusted Outstanding Debt, Adjusted Net Debt and Adjusted Net
Debt Leverage Ratio, all Reflecting Refinancing Transactions and
the Lottery Business Sale
Adjusted outstanding debt as used herein, is a non-GAAP
financial measure, that represents the principal amount of
outstanding debt 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 for the impact
of the April 14, 2022 refinancing transactions. Adjusted net debt
reflecting refinancing transactions and the Lottery Business sale,
as used herein, is a non-GAAP financial measure defined as net debt
as of March 31, 2022, plus pending Austria Lottery business
proceeds of approximately $104 million less cash held at Lottery
business. Adjusted net debt leverage ratio reflecting refinancing
transactions and the Lottery Business sale, as used herein, is a
non-GAAP financial measure defined as adjusted net debt reflecting
refinancing transactions and the Lottery Business sale divided by
Combined AEBITDA for the last twelve months, excluding Lottery
Business operations and certain immaterial continuing operations
equity method investments.
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version on businesswire.com: https://www.businesswire.com/news/home/20220510006266/en/
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
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