Reduced Principal Face Value of Debt
Outstanding(1) to $4.0 Billion and Net Debt Leverage Ratio(2) to
3.6x
Delivered Consolidated Revenue from
Continuing Operations of $610 Million, Up 5% Year-Over-Year
Returned $203 Million of Capital to
Shareholders Through Share Repurchases, Representing 27% of Total
Program Authorization
Significant Opportunity for Value Creation
Underpinned by Long-Term Targets Provided at 2022 Investor
Day
Light & Wonder, Inc. (NASDAQ: LNW) (formerly known as
Scientific Games Corporation) (“Light & Wonder,” “L&W,” or
the “Company”) today reported results for the second quarter ended
June 30, 2022.
Barry Cottle, President and Chief Executive Officer of Light
& Wonder, said, “We made great strides in the second
quarter as we continued to execute on our vision and the
transformation of our Company. We closed on the sale of our Lottery
business for $5.7 billion in gross cash proceeds, which we used to
significantly de-lever our balance sheet as we continue to deliver
on our promises. With the Lottery business sale and anticipated
closing on the sale of our Sports Betting business by the end of
the third quarter, we have achieved a significant milestone in the
transformation of our organization.
“We now have all the pieces in place and are singularly focused
on building great games fully cross-platform. We recently hosted
our inaugural investor day and detailed a roadmap for taking market
share and unlocking tremendous value in a $70 billion TAM. This
quarter we made tangible progress against our strategies as we
delivered strong operating momentum and topline growth in the
quarter. The success we are seeing this quarter is the result of
the fundamental changes we have made throughout the business.
Adding it all up, we couldn’t be more excited about the progress we
are making and our path forward as the leading cross-platform
global game company.”
Connie James, Chief Financial Officer of Light &
Wonder, added, “The pace and scale of the business and
financial transformation over the past year has been incredible.
This quarter was no exception as our teams successfully closed on
the Lottery business sale and refinancing transactions.
Collectively, these transactions have transformed our balance
sheet, enabling us to end the quarter with a net debt leverage
ratio(2) of 3.6x, 7 turns lower than where we stood at the
beginning of last year. With our reconstituted balance sheet, we
have the financial flexibility to invest in our largest growth
opportunities to drive the business forward.
“With our strong financial profile, including a high mix of
recurring and digital revenues, sustainable double-digit growth,
and a strong cash flow profile we will generate significant excess
capital. We are actively executing on our capital allocation
priorities as we paid down $4.9 billion of debt in the quarter and
repurchased $203 million of our shares, or 27% of our total buyback
authorization, in just five months. As we look forward, we will
continue to drive operational excellence throughout our
organization creating a strong foundation for growth.”
(1)
Principal face value of debt
outstanding represents outstanding principal value of debt balances
that conforms to the presentation found in Note 11 to the Condensed
Consolidated Financial Statements in our March 31, 2022 and June
30, 2022 Form 10-Q.
(2)
Represents a non-GAAP financial
measure. Additional information on non-GAAP financial measures
presented herein is available at the end of this release.
BUSINESS AND STRATEGY UPDATE
- Overall, the Company is making great progress as it
executes on its strategy and roadmap presented at its 2022 Investor
Day driving long-term value creation.
- Delivered strong topline growth, driven by strong growth
in Gaming combined with growth at SciPlay. The prior year period
was impacted by the VAT recovery benefit of $38 million.
- Continued expansion in high-growth digital markets,
continued growth in SciPlay, while iGaming business grew 7% on a
constant currency revenue(1)(2) basis year-over-year.
- Streamlined the organization with the completed Lottery
business divestiture, which closed during the second quarter
for $5.7 billion in gross cash proceeds, with the sale of the
Sports Betting business expected to be completed by the end of the
third quarter of 2022, subject to applicable regulatory approvals
and other customary closing conditions. We amended the Sports
Betting business purchase agreement with Endeavor, under which we
expect to receive $750 million in cash and estimated $50 million in
Class A common stock of Endeavor, or estimated total gross proceeds
of $800 million. The amendment also increases the speed and
certainty of closing by modifying certain closing conditions.
- Significantly de-levered and transformed the balance
sheet, reduced the principal face value of debt outstanding(3)
by $4.9 billion as compared to Q1 2022, with net debt leverage
ratio(1) declining to 3.6x from 6.1x at March 31, 2022. The Company
continues to be on a clear path to reach its targeted net debt
leverage ratio range(1) of 2.5x to 3.5x.
- Returned $203 million of capital to shareholders through
the repurchase of approximately 3.7 million shares of common stock,
or 27% of the total authorization, since initiation of the program
on March 3, 2022.
SUMMARY RESULTS
We have reflected our Lottery business (disposed during the
second quarter of 2022) and Sports Betting business as discontinued
operations for all periods presented. Unless otherwise noted,
amounts, percentages and discussion included below reflect the
results of operations and financial condition of the Company’s
continuing operations, which includes its Gaming, SciPlay and
iGaming businesses.
Three Months Ended June
30,
($ in millions)
2022
2021
Revenue
$
610
$
581
Net loss
(150
)
(51
)
Combined net cash (used in) provided by
operating activities
(37
)
149
Capital expenditures
57
40
Non-GAAP Financial Measures
Consolidated AEBITDA(1)
$
212
$
232
Combined free cash flow(1)
(95
)
133
As of
Balance Sheet Measures
June 30, 2022
December 31, 2021
Combined cash and cash equivalents
$
971
$
629
Total debt
3,902
8,690
Available liquidity(4)
1,859
1,417
(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)
Constant currency revenue is
calculated by translating current period non-U.S. denominated
revenue using the prior year’s currency conversion rate. Foreign
currency impact on iGaming revenue for the second quarter of 2022
was $4 million. The management uses or refers to growth rates at
constant currency so that the revenue results can be viewed without
the impact of fluctuations in foreign currency exchange rates,
thereby facilitating period-to-period comparisons given significant
mix of iGaming revenue is denominated in non-U.S. dollar.
(3)
Principal face value of debt
outstanding represents outstanding principal value of debt balances
that conforms to the presentation found in Note 11 to the Condensed
Consolidated Financial Statements in our March 31, 2022 and June
30, 2022 Form 10-Q.
(4)
Available liquidity is calculated
as combined cash and cash equivalents plus remaining revolver
capacity, including the SciPlay Revolver.
Second Quarter 2022 Financial Highlights:
- Second quarter consolidated revenue was $610 million
compared to $581 million, up 5% compared to the prior year period.
Prior year revenue benefited from $38 million VAT recovery,
reducing the year-over-year revenue growth comparability by 7
percentage points. Our Gaming business demonstrated continued
strong momentum including growth in all lines of business
year-over-year (excluding impact of VAT recovery benefit on Gaming
Operations in the prior year period) and robust sequential growth
in Gaming Operations and Game Sales. Revenue also benefited from
year-over-year growth at SciPlay, while iGaming businesses momentum
continued despite 7% unfavorable impact of foreign currency
translation.
- Net loss from continuing operations was $150 million
compared to a net loss of $51 million in the prior year period. Net
loss increased primarily as a result of $147 million in loss on
financing transactions associated with the April 2022 debt pay down
and refinancing transactions.
- Consolidated AEBITDA from continuing operations, a
non-GAAP financial measure defined below, was $212 million, a
decline of 9% compared to the prior year period. The prior year
period Consolidated AEBITDA benefited from VAT recovery, reducing
the year-over-year comparability by approximately 18 percentage
points.
- Combined net cash (used in) provided by operating
activities was $(37) million compared to $149 million in the
prior year period, which includes the VAT recovery benefit
described above. The current year cash flows were impacted by costs
associated with the strategic review and related transactions and
accelerated interest payments related to the debt pay down and
refinancing transactions, coupled with investments to meet the
growing demand from operators for our products.
- Combined free cash flow, a non-GAAP financial measure
defined below, was $(95) million, which includes both continuing
and discontinued operations. The current year combined free cash
flow was impacted by approximately $114 million in costs supporting
strategic review and related transactions (including the Lottery
business closing expenses) and accelerated interest payments
related to the debt pay down and refinancing transactions, coupled
with investments to meet the growing demand from operators for our
products. We expect free cash flow to continue to scale and
normalize post the finalization of the divestitures.
- Net debt leverage ratio, a non-GAAP financial measure
defined below, declined to 3.6x from 6.1x since March 31, 2022,
following the sale of the Lottery business and the subsequent
refinancing transaction in April of 2022.
CONTINUING OPERATIONS BUSINESS
SEGMENT HIGHLIGHTS
FOR THE THREE MONTHS ENDED
JUNE 30, 2022
($ in millions)
Revenue
AEBITDA
AEBITDA Margin(1)(2)
2022
2021
$
%
2022
2021
$
%
2022
2021
PP Change(2)
Gaming(3)
$
390
$
367
$
23
6
%
$
179
$
194
$
(15
)
(8
)%
46
%
53
%
(7
)
SciPlay
160
154
6
4
%
41
48
(7
)
(15
)%
26
%
31
%
(5
)
iGaming
60
60
—
—
%
21
20
1
5
%
35
%
33
%
2
Corporate and other(4)
—
—
—
—
%
(29
)
(30
)
1
3
%
n/a
n/a
n/a
Total
$
610
$
581
$
29
5
%
$
212
$
232
$
(20
)
(9
)%
35
%
40
%
(5
)
PP - percentage points. n/a - not applicable.
(1)
Segment AEBITDA Margin is
calculated as segment AEBITDA as a percentage of segment
revenue.
(2)
As calculations are made using
whole dollar numbers, actual results may vary compared to
calculations presented in this table.
(3)
The three months ended June 30,
2021 Gaming Business Segment Revenue includes $38 million U.K. FOBT
VAT recovery ("the VAT recovery") received from certain U.K.
customers related to a 2020 U.K. court ruling associated with
overcharging of value-added tax for gaming operators that
consequently reduced our net gaming revenues related to these
customers and arrangements, also impacting Gaming Business Segment
AEBITDA.
(4)
Includes amounts not allocated to
the business segments (including corporate costs) and other
non-operating expenses (income).
Second Quarter 2022 Key Highlights
- Gaming revenue increased 6% to $390 million compared to
the prior year period, primarily driven by strong growth in Gaming
operations, which once again exceeded 2019 levels driven by record
North America premium installed base units, and continued elevated
average daily revenue per unit, coupled with robust growth in Game
sales, Systems and Table games businesses. The prior year period
Gaming revenue benefited from VAT recovery, reducing the
year-over-year comparability by 13 percentage points. Gaming
AEBITDA was $179 million, down 8% compared to the prior year
period. AEBITDA growth was impacted by VAT recovery that benefited
the prior year period, reducing the growth comparability by 23
percentage points.
- Gaming Operations revenue benefited from growth
in our installed base and average daily revenue per unit, driven by
strong content performance and the success of our Kascada and Mural
cabinets. Our North American premium installed base grew for the
8th consecutive quarter, maintaining a record 43% of our total
installed base mix. Additionally, we continue to see positive
momentum with the launch of the Kascada Dual Screen, validating our
continued investment in R&D to drive our long-term growth.
- SciPlay revenue grew 4% to $160 million compared to the
prior year period. Growth benefited from the Alictus acquisition,
while the core social casino business delivered strong payer
metrics, outpaced the market and grew share. Payer conversion rates
achieved an all-time high and AMRPPU remained at elevated levels
due to continued strong engagement and monetization of our
players.
- iGaming revenue was $60 million, driven by growth in the
U.S. market coupled with continued strong performance of acquired
businesses and partially offset by $4 million in unfavorable impact
of foreign-currency translation due to strengthening U.S. Dollar,
impacting revenue by 7%. The U.S market delivered 47%
year-over-year revenue growth, driven in part by the strength of
our original content and growth in GGR. AEBITDA increased 5% driven
by the scaling of original content launches as well as our
acquisitions, partially offset by higher costs associated with
continued investments supporting ongoing growth, including our
upcoming launch of live casino in the U.S. expected in the fourth
quarter of 2022.
- Playzido was acquired in April 2022, a dynamic content
creation platform provider and game supplier, which is expected to
accelerate the pace at which we can partner with game studios and
operators to expand our original iGaming content offering.
LIQUIDITY
- Significant debt reduction of $4.9 billion in the
quarter to end second quarter with $4.0 billion of principal face
value of debt outstanding due to sale of the Lottery business and
the subsequent refinancing transaction in April. This is expected
to result in approximately $225 million in annualized cash interest
savings.
- Net debt leverage ratio, a non-GAAP financial measure
defined below, declined to 3.6x from 6.1x since March 31, 2022 and
is down approximately 7 turns from the peak level at the beginning
of 2021.
- Combined net cash (used in) provided by operating
activities was $(37) million compared to $149 million in the
prior year period, which includes the VAT recovery benefit
described above. The current year cash flows were impacted by costs
associated with the strategic review and related transactions and
accelerated interest payments related to the debt pay down and
refinancing transactions, coupled with investments to meet the
growing demand from operators for our products.
- Combined free cash flow, a non-GAAP financial measure
defined below, was $(95) million, which includes both continuing
and discontinued operations. The current year combined free cash
flow was impacted by approximately $114 million in costs supporting
strategic review and related transactions (including the Lottery
business closing expenses) and accelerated interest payments
related to the debt pay down and refinancing transactions, coupled
with investments to meet the growing demand from operators for our
products. We expect free cash flow to continue to scale and
normalize post the finalization of the divestitures.
- Capital expenditures from continuing operations were $57
million in the second quarter of 2022.
Earnings Conference Call
As previously announced, Light & Wonder executive
leadership will host a conference call on Tuesday, August 9, 2022,
at 4:30 p.m. EDT to review the Company’s second 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 (844) 200-6205 for U.S. or +1 (929)
526-1599 for International and ask to join the Light & Wonder
call using conference ID: 512562. 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 our Sports Betting
business, which is expected to be completed in the third quarter of
2022, which is subject to applicable regulatory approvals, other
customary closing conditions (“Pending Divestiture”), including
lack of assurance regarding the timing of completion of the pending
and proposed transaction 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 this divestiture, that the
transaction 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 net proceeds from the Pending
Divestiture;
- 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;
- 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 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;
- 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 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 recalculate.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited, in millions,
except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Revenue:
Services
$
445
$
444
$
876
$
808
Product sales
165
137
307
226
Total revenue
610
581
1,183
1,034
Operating expenses:
Cost of services(1)
92
96
182
183
Cost of product sales(1)
88
63
159
103
Selling, general and administrative
179
180
354
339
Research and development
56
48
109
93
Depreciation, amortization and
impairments
107
96
215
193
Restructuring and other
42
30
78
51
Total operating expenses
564
513
1,097
962
Operating income
46
68
86
72
Other (expense) income:
Interest expense
(70
)
(119
)
(186
)
(240
)
Loss on debt financing transactions
(147
)
—
(147
)
—
Gain (loss) on remeasurement of debt and
other
20
(7
)
27
18
Other income, net
2
13
7
20
Total other expense, net
(195
)
(113
)
(299
)
(202
)
Net loss from continuing operations before
income taxes
(149
)
(45
)
(213
)
(130
)
Income tax expense
(1
)
(6
)
(4
)
(9
)
Net loss from continuing operations
(150
)
(51
)
(217
)
(139
)
Net income from discontinued operations,
net of tax(2)
3,445
164
3,540
243
Net income
3,295
113
3,323
104
Less: Net income attributable to
noncontrolling interest
4
4
6
10
Net income attributable to L&W
$
3,291
$
109
$
3,317
$
94
Per Share - Basic:
Net loss from continuing operations
$
(1.62
)
$
(0.58
)
$
(2.33
)
$
(1.55
)
Net income from discontinued
operations
36.23
1.71
36.94
2.53
Net income attributable to L&W
$
34.61
$
1.13
$
34.61
$
0.98
Per Share - Diluted:
Net loss from continuing operations
$
(1.62
)
$
(0.58
)
$
(2.33
)
$
(1.55
)
Net income from discontinued
operations
36.23
1.71
36.94
2.53
Net income attributable to L&W
$
34.61
$
1.13
$
34.61
$
0.98
Weighted average number of shares used in
per share calculations:
Basic shares
95
96
96
96
Diluted shares
95
96
96
96
(1)
Excludes depreciation and
amortization.
(2)
The three and six month periods
ended June 30, 2022 include pre-tax gain of $4,568 million on sale
of Lottery business.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited, in millions except
for common shares outstanding)
June 30,
December 31,
2022
2021
Assets:
Cash and cash equivalents
$
928
$
585
Restricted cash
44
41
Receivables, net of allowance for credit
losses $46 and $52, respectively
415
423
Inventories
129
98
Prepaid expenses, deposits and other
current assets
126
88
Assets of businesses held for sale
106
497
Total current assets
1,748
1,732
Restricted cash
7
9
Receivables, net of allowance for credit
losses $2 and $2, respectively
15
17
Property and equipment, net
205
213
Operating lease right-of-use assets
51
51
Goodwill
2,932
2,892
Intangible assets, net
837
946
Software, net
121
117
Deferred income taxes
93
349
Other assets
43
80
Assets of businesses held for sale
429
1,477
Total assets
$
6,481
$
7,883
Liabilities and Stockholders’
Equity (Deficit):
Current portion of long-term debt
$
24
$
44
Accounts payable
164
204
Accrued liabilities
359
428
Income taxes payable
681
16
Liabilities of businesses held for
sale
26
282
Total current liabilities
1,254
974
Deferred income taxes
143
35
Operating lease liabilities
40
40
Other long-term liabilities
158
170
Long-term debt, excluding current
portion
3,878
8,646
Liabilities of businesses held for
sale
42
124
Total stockholders’ equity
(deficit)(1)
966
(2,106
)
Total liabilities and stockholders’ equity
(deficit)
$
6,481
$
7,883
(1)
Includes $155 million and $150
million in noncontrolling interest as of June 30, 2022 and December
31, 2021, respectively.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, in
millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Cash flows from operating activities:
Net income
$
3,295
$
113
$
3,323
$
104
Less: Income from discontinued operations,
net of tax
(3,445
)
(164
)
(3,540
)
(243
)
Adjustments to reconcile net loss from
continuing operations to net cash provided by operating activities
from continuing operations
248
149
369
245
Changes in working capital accounts,
excluding the effects of acquisitions
(73
)
(17
)
(145
)
—
Changes in deferred income taxes and
other
2
4
6
4
Net cash provided by operating activities
from continuing operations
27
85
13
110
Net cash (used in) provided by operating
activities from discontinued operations
(64
)
64
44
162
Net cash (used in) provided by operating
activities
(37
)
149
57
272
Cash flows from investing activities:
Capital expenditures
(57
)
(40
)
(100
)
(75
)
Acquisitions of businesses, net of cash
acquired
(8
)
—
(116
)
—
Proceeds from settlement of cross-currency
interest rate swaps
50
—
50
—
Other
(4
)
8
(4
)
9
Net cash used in investing activities from
continuing operations
(19
)
(32
)
(170
)
(66
)
Net cash provided by (used in) investing
activities from discontinued operations(1)
5,654
(5
)
5,629
(32
)
Net cash provided by (used in) investing
activities
5,635
(37
)
5,459
(98
)
Cash flows from financing activities:
Payments of long-term debt, net
(5,032
)
(161
)
(4,882
)
(271
)
Payments of debt issuance and deferred
financing costs
(36
)
—
(37
)
—
Payments on license obligations
(5
)
(12
)
(24
)
(24
)
Purchase of treasury stock
(152
)
—
(203
)
—
Purchase of SciPlay’s common stock
(7
)
—
(7
)
—
Net redemptions of common stock under
stock-based compensation plans and other
(8
)
(8
)
(33
)
(21
)
Net cash used in financing activities from
continuing operations
(5,240
)
(181
)
(5,186
)
(316
)
Net cash used in financing activities from
discontinued operations
(1
)
(4
)
(3
)
(8
)
Net cash used in financing activities
(5,241
)
(185
)
(5,189
)
(324
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(5
)
1
(6
)
—
Increase (decrease) in cash, cash
equivalents and restricted cash
352
(72
)
321
(150
)
Cash, cash equivalents and restricted
cash, beginning of period
670
1,065
701
1,143
Cash, cash equivalents and restricted
cash, end of period
1,022
993
1,022
993
Less: Cash, cash equivalents and
restricted cash of discontinued operations
43
74
43
74
Cash, Cash equivalents and restricted cash
of continuing operations, end of period
$
979
$
919
$
979
$
919
Supplemental cash flow information:
Cash paid for interest
$
102
$
106
$
219
$
229
Income taxes paid
14
6
23
13
Distributed earnings from equity
investments
3
11
4
15
Supplemental non-cash transactions:
Non-cash interest expense
$
3
$
6
$
9
$
12
(1)
Three and six month periods ended
June 30, 2022 include $5,659 million in gross cash proceeds from
the Lottery business sale, net of cash, cash equivalents and
restricted cash transferred.
LIGHT & WONDER, INC. AND
SUBSIDIARIES
RECONCILIATION OF CONSOLIDATED
AEBITDA - CONTINUING OPERATIONS AND
SUPPLEMENTAL BUSINESS SEGMENT
DATA
(Unaudited, in
millions)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Reconciliation of
Net Income Attributable to L&W to Consolidated AEBITDA -
Continuing Operations
Net income attributable to L&W
$
3,291
$
109
$
3,317
$
94
Net income attributable to noncontrolling
interest
4
4
6
10
Net income from discontinued operations,
net of tax
(3,445
)
(164
)
(3,540
)
(243
)
Net loss from continuing operations
(150
)
(51
)
(217
)
(139
)
Restructuring and other(1)
42
30
78
51
Depreciation, amortization and
impairments
107
96
215
193
Other income, net
(2
)
(11
)
(4
)
(17
)
Interest expense
70
119
186
240
Income tax expense
1
6
4
9
Stock-based compensation
17
36
32
55
Loss on debt financing transactions
147
—
147
—
(Gain) loss on remeasurement of debt and
other
(20
)
7
(27
)
(18
)
Consolidated AEBITDA - continuing
operations
$
212
$
232
$
414
$
374
Supplemental
Business Segment Data
Business segments AEBITDA - continuing
operations
Gaming
$
179
$
194
$
350
$
301
SciPlay
41
48
85
94
iGaming
21
20
41
41
Total business segments AEBITDA -
continuing operations
241
262
476
436
Corporate and other(2)
(29
)
(30
)
(62
)
(62
)
Consolidated AEBITDA - continuing
operations
$
212
$
232
$
414
$
374
(1)
Refer to the Consolidated AEBITDA
- continuing operations definition below for a description of items
included in restructuring and other.
(2)
Includes amounts not allocated to
the business segments (including corporate costs) and other
non-operating expenses (income), representing 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
June 30, 2022
June 30, 2021
March 31, 2022
Gaming Business
Segment Supplemental Financial Data:
Revenue by line of
business:
Gaming operations
$
163
$
181
$
155
Gaming machine sales
123
100
103
Gaming systems
60
52
51
Table products
44
34
46
Total revenue
$
390
$
367
$
355
Gaming
Operations:
U.S. and Canada:
Installed base at period end
30,836
29,965
30,359
Average daily revenue per unit
$
45.86
$
44.58
$
43.39
International:(1)
Installed base at period end
28,966
31,412
29,762
Average daily revenue per unit
$
13.63
$
8.44
$
13.72
Gaming Machine
Sales:
U.S. and Canada new unit shipments
4,009
3,221
3,382
International new unit shipments
2,479
1,751
1,914
Total new unit shipments
6,488
4,972
5,296
Average sales price per new unit
$
17,176
$
17,048
$
17,099
Gaming Machine Unit
Sales Components:
U.S. and Canada unit shipments:
Replacement units
3,369
2,541
3,152
Casino opening and expansion units
640
680
230
Total unit shipments
4,009
3,221
3,382
International unit shipments:
Replacement units(2)
2,443
1,751
1,914
Casino opening and expansion units
36
—
—
Total unit shipments
2,479
1,751
1,914
SciPlay Business
Segment Supplemental Financial Data:
Revenue:
Mobile in-app purchases
$
138
$
136
$
140
Web in-app purchases and other(3)
22
18
18
Total revenue
$
160
$
154
$
158
In-App
Purchases:
Mobile penetration(4)
90
%
88
%
90
%
Average MAU(5)
5.9
6.3
6.3
Average DAU(6)
2.3
2.3
2.3
ARPDAU(7)
$
0.74
$
0.72
$
0.74
Average MPU(8)
0.6
0.5
0.6
AMRPPU(9)
$
90.99
$
96.29
$
92.45
Payer Conversion Rate(10)
9.4
%
8.5
%
8.9
%
iGaming Business
Segment Supplemental Data:
Wagers processed through Open Gaming
System (in billions)
$
17.8
$
18.0
$
17.5
(1)
Excludes the impact of game
content licensing revenue.
(2)
The June 30, 2021 reported amount
of 1,751 for International casino opening and expansion units has
been reclassified to the International replacement units to correct
a misclassification in the prior year period..
(3)
Other primarily consists of
advertising revenue which was not material for the periods
presented.
(4)
Mobile penetration is defined as
the percentage of SciPlay revenue generated from mobile
platforms.
(5)
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.
(6)
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.
(7)
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.
(8)
MPU = Monthly Paying Users is the
number of individual users who made an in-game purchase during a
particular month.
(9)
AMRPPU = Average Monthly Revenue
Per Paying User is calculated by dividing average monthly revenue
by average MPUs for the applicable time period.
(10)
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
June 30, 2022
March 31, 2022
December 31, 2020
Net income attributable to L&W
$
3,594
$
412
$
(569
)
Net income attributable to noncontrolling
interest
15
15
21
Net income from discontinued operations,
net of tax
(3,663
)
(382
)
(253
)
Net (loss) income from continuing
operations
(54
)
45
(801
)
Restructuring and other
194
182
56
Depreciation, amortization and
impairments
420
409
449
Goodwill impairment
—
—
54
Other (income) expense, net
(15
)
(24
)
9
Interest expense
424
473
503
Income tax benefit
(323
)
(318
)
(3
)
Stock-based compensation
90
109
56
Loss on debt financing transactions
147
—
—
(Gain) loss on remeasurement of debt and
other
(50
)
(23
)
51
Consolidated AEBITDA - continuing
operations
$
833
$
853
$
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, 2020
Net income from discontinued operations,
net of tax
$
382
$
253
Income tax expense
81
7
Restructuring and other
10
11
Depreciation, amortization and
impairments
53
105
EBITDA from equity investments(1)
76
30
(Earnings) loss from equity
investments
(38
)
9
Stock-based compensation and other,
net
(43
)
4
AEBITDA from discontinued
operations(2)
$
521
$
419
EBITDA from equity investments -
continuing operations(3)
9
7
Combined AEBITDA(3)
$
1,383
$
800
RECONCILIATION OF PRINCIPAL
FACE VALUE OF DEBT OUTSTANDING TO NET DEBT AND NET DEBT LEVERAGE
RATIO
As of
June 30, 2022
March 31, 2022
December 31, 2020
Consolidated AEBITDA/Combined
AEBITDA(3)
$
833
$
1,383
$
800
Total debt
$
3,902
$
8,833
$
9,303
Add: Unamortized debt discount/premium and
deferred financing costs, net
51
77
104
Add: Impact of exchange rate
—
73
7
Less: Debt not requiring cash repayment
and other
(3
)
(3
)
(7
)
Principal face value of debt
outstanding
3,950
8,980
9,407
Less: Combined cash and cash
equivalents(4)
971
582
1,016
Net debt
$
2,979
$
8,398
$
8,391
Net debt leverage ratio(5)
3.6
6.1
10.5
(1)
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.
(2)
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.
(3)
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.
(4)
Includes cash and cash
equivalents of both continuing operations and discontinued
operations, as the combined amount is available for debt
payments.
(5)
Calculation of net debt leverage
ratio does not include anticipated $665 million estimated cash
taxes associated with the sale of Lottery business nor net cash
proceeds associated with the pending sale of our Sports Betting
business.
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 June
30,
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
$
143
$
(116
)
$
27
$
(64
)
$
(37
)
$
195
$
(110
)
$
85
$
64
$
149
Less: Capital expenditures
(57
)
—
(57
)
(5
)
(62
)
(40
)
—
(40
)
(13
)
(53
)
Less: Distributions from equity method
investments, net of additions
—
—
—
—
—
1
—
1
15
16
Less: Payments on license obligations
(5
)
—
(5
)
—
(5
)
(12
)
—
(12
)
(4
)
(16
)
Add: Change in restricted cash impacting
working capital
6
—
6
3
9
3
—
3
34
37
Free cash flow
$
87
$
(116
)
$
(29
)
$
(66
)
$
(95
)
$
147
$
(110
)
$
37
$
96
$
133
Supplemental cash flow information -
Strategic Review and Related Costs Impacting Combined Free Cash
Flows:
Disposition and other closing expenses
$
80
Accelerated cash interest payments and
other payments related to April 2022 refinancing(4)
16
Professional fees and services supporting
Strategic review and related activities
18
(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 debt structure for periods presented 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.
(4)
Excludes impact of interest
savings anticipated as a result of April 2022 refinancing
transactions of approximately $21 million.
Six Months Ended June
30,
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 provided by operating
activities
$
253
$
(240
)
$
13
$
44
$
57
$
349
$
(239
)
$
110
$
162
$
272
Less: Capital expenditures
(100
)
—
(100
)
(30
)
(130
)
(75
)
—
(75
)
(28
)
(103
)
Less: Distributions from equity method
investments, net of additions
—
—
—
—
—
2
—
2
5
7
Less: Payments on license obligations
(24
)
—
(24
)
(2
)
(26
)
(24
)
—
(24
)
(5
)
(29
)
(Less) add: Change in restricted cash
impacting working capital
(1
)
—
(1
)
(6
)
(7
)
8
—
8
58
66
Free cash flow
$
128
$
(240
)
$
(112
)
$
6
$
(106
)
$
260
$
(239
)
$
21
$
192
$
213
Supplemental cash flow information -
Strategic Review and Related Costs Impacting Combined Free Cash
Flows:
Disposition and other closing expenses
$
80
Accelerated cash interest payments and
other payments related to April 2022 refinancing(4)
16
Professional fees and services supporting
Strategic review and related activities
64
(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 debt structure for periods presented 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.
(4)
Excludes impact of interest
savings anticipated as a result of April 2022 refinancing
transactions of approximately $92 million.
RECONCILIATION OF EARNINGS FROM EQUITY INVESTMENTS TO
EBITDA FROM EQUITY INVESTMENTS AND COMBINED EBITDA FROM EQUITY
INVESTMENTS
Twelve Months Ended
March 31, 2022
December 31, 2020
Continuing Operations
Discontinued
Operations
Continuing Operations
Discontinued
Operations
Earnings (loss) from equity
investments
$
5
$
38
$
3
$
(9
)
Add: Income tax expense
—
11
—
3
Add: Depreciation, amortization and
impairments
1
31
1
31
Add: Interest income, net and other
3
(4
)
3
5
EBITDA from equity investments
$
9
$
76
$
7
$
30
Combined EBITDA from equity
investments(1)
$
85
$
37
(1)
Combined EBITDA from equity
investments consists of EBITDA from both discontinued and
continuing operations equity investments.
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. On June 30, 2022, we entered into
an amendment to the agreement, under which the cash consideration
was reduced from $1,000 million to $750 million and the stock
consideration was reduced from approximately 7.6 million shares of
Endeavor Class A Common stock (valued at approximately $200 million
as of the date of the purchase agreement) to approximately 2.3
million shares of Endeavor Class A Common stock (valued at
approximately $50 million as of the date of the amendment and based
on the volume weighted average price of Endeavor Class A Common
stock in the twenty days before the date of the amendment). The
amendment additionally waives the closing condition requiring
regulatory approval by the Nevada Gaming Control Board and extends
the agreement date to December 30, 2022 if certain conditions to
closing are not met by September 27, 2022. The sale of the Sports
Betting business is expected to be completed in the third quarter
of 2022, subject to applicable regulatory approvals and other
customary closing conditions. On October 27, 2021, we entered into
a definitive agreement to sell our Lottery business to Brookfield
Business Partners L.P., which was completed during the second
quarter of 2022.
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
businesses 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 (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 Net debt and Net debt leverage
ratio in monitoring and evaluating the Company’s overall liquidity,
financial flexibility and leverage.
As described in this earning release, the Company divested its
Lottery business and is in the process of divesting its Sports
Betting businesses and as such, historical financial information
for these businesses is classified as discontinued operations, as
described above. The Company’s management believes that Combined
free cash flow is useful during the period until the disposition
occurs as it provides management and investors with information
regarding the Company’s combined financial condition under the
structure as of June 30, 2022, including for prior period
comparisons, as the Company is finalizing the divestiture and
transforming its strategy.
Additionally, Combined free cash flow provides greater
visibility into cash available for the continuing operations to use
in investing and financing decisions as this 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 is helpful because
this non-GAAP financial measure eliminates the effects of
restructuring, transaction, integration or other items that
management believes are less indicative of the ongoing underlying
performance of continuing operations (as more fully described
below) and are better evaluated separately. 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.
Consolidated AEBITDA is reconciled to Net income 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) Loss on debt financing transactions; (6)
Change in fair value of investments and (Gain) loss on
remeasurement of debt and other; (7) Interest expense; (8) Income
tax expense; (9) Stock-based compensation; and (10) 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 and is
presented only for purposes of calculating and reconciling Net debt
leverage ratio.
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 and is presented only for purposes of calculating and
reconciling Net debt leverage ratio.
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
June 30, 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 (paid off as of
June 30, 2022) were translated at the constant foreign exchange
rate at issuance of these notes as those amounts were payable at
the original issuance amounts in Euro. Net debt leverage ratio, as
used herein, represents Net debt divided by Consolidated AEBITDA
for current period and Combined AEBITDA for prior period (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.
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version on businesswire.com: https://www.businesswire.com/news/home/20220809005468/en/
Media Relations Grace
Russell, +1 702-577-7928 Senior Director, Corporate Communications
media@lnw.com Investor
Relations Jim Bombassei, +1 702-532-7643 Senior Vice
President, Investor Relations jbombassei@lnw.com
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