Light & Wonder, Inc. Reports Second Quarter 2023 Results

Light & Wonder, Inc. (NASDAQ and ASX: LNW) (“Light & Wonder,” “L&W,” or the “Company”) today reported results for the second quarter ended June 30, 2023.

We continued with strong momentum and delivered a ninth consecutive quarter of consolidated revenue growth year-over-year. Consolidated revenue in the quarter grew 20%, resulting in strong margins and cash flows as we continued our advancement toward our long-term financial targets. The growth was driven by double-digit growth across all of our businesses, including another quarter of record revenues for SciPlay and iGaming:

• Gaming revenue increased 21% compared to the prior year period to $471 million, primarily due to continued momentum in Gaming machine sales, which increased 41% driven by increases in North American and Australian machine sales, coupled with strong performance in North American Gaming operations, Gaming systems and Table products.

• SciPlay achieved record revenue of $190 million, a 19% increase compared to the prior year period, driven by the core social casino business, which once again delivered strong payer metrics and outpaced the market and gained share.

• iGaming revenue reached another record quarterly revenue of $70 million, a 17% increase from the prior year period, primarily driven by continued growth in the U.S. market.

Matt Wilson, President and Chief Executive Officer of Light & Wonder,said, “Our reported numbers continue to validate the investments that we’ve made in our business and demonstrate the significant progress we are making towards our long-term targets. Year to date, we delivered double-digit top and bottom line growth across all three of our businesses, generated strong cash flows and reduced leverage, resulting in an exceptional second quarter. I am also pleased to share that Light & Wonder is expanding its global presence, with a successful ASX listing during the quarter that is gaining momentum with the investment community. We will continue to execute on our core strategy and product roadmap, and look forward to sharing more with you at Australasian Gaming Expo in August and Global Gaming Expo in October.”

Connie James, Chief Financial Officer of Light & Wonder, added, “I am proud to have been part of such a diverse and capable team, and of our many accomplishments during my time here as my tenure comes to an end at Light & Wonder. We accomplished a number of meaningful milestones in transforming the Company and are now well-positioned with a healthy balance sheet and a strategic capital allocation plan. The continued growth we saw in the second quarter reflects the focused execution that is in our DNA. With a wealth of talent, sound financials, and an outstanding portfolio of assets, Light & Wonder continues to be in good hands moving forward as the leading cross-platform global games company.”

LEVERAGE, CAPITAL RETURN, AND STRATEGY UPDATE

• Principal face value of debt outstanding⁽¹⁾ of $3.9 billion, translating to net debt leverage ratio⁽²⁾ of 2.9x, within our targeted net debt leverage ratio⁽²⁾ range of 2.5x to 3.5x, as of June 30, 2023, a decrease of 0.4x from December 31, 2022, and the lowest level in the Company’s recent history.

• Secondary listing on the Australian Securities Exchange (ASX) — the Company’s common stock is listed as CHESS Depositary Interests (CDIs) on the ASX and commenced active trading on May 22, 2023 (AEST) under the ticker symbol “LNW.” The Company believes this secondary listing will create substantial benefits for L&W and its shareholders, including enhancing the Company’s profile in Australia, one of the leading markets for L&W’s Gaming business, and providing the Company access to new long-term Australian institutional investors that complement our strong existing base of shareholders.

• Agreement to acquire the remaining 17% equity interest in SciPlay —On August 8, 2023, the Company entered into a definitive agreement to acquire the remaining equity interest in SciPlay not already owned by the Company (approximately 17%) pursuant to a merger in which SciPlay’s shareholders will receive $22.95 for each share of SciPlay Class A common stock they own (subject to certain exceptions set forth in the Merger Agreement, dated as of August 8, 2023, by and among Light & Wonder, Bern Merger Sub, Inc. and SciPlay (the “Merger Agreement”)) in an all-cash transaction (the “SciPlay Acquisition”). As a result of the SciPlay Acquisition, SciPlay will cease to be publicly traded and will become a wholly owned subsidiary of L&W. The Company believes that this transaction will enable seamless collaboration with SciPlay that will add further momentum to the Company’s already robust cross-platform strategy, provide flexibility for use of SciPlay cash flows for investments across the enterprise, and facilitate long-term margin enhancement opportunities via synergies, all of which are expected to increase shareholder value.

SUMMARY RESULTS

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

Second Quarter 2023 Financial Highlights

• Second quarter consolidated revenue was $731 million compared to $610 million, up 20% compared to the prior year period driven by double-digit growth across all of our businesses, representing a ninth consecutive quarter of growth. Gaming revenue increased 21%, driven by another quarter of robust growth in Gaming machine sales, which grew 41% year-over-year, while SciPlay and iGaming each reached another quarterly revenue record.

• Net income was $5 million compared to a net loss of $150 million in the prior year period, which included a $147 million loss on financing transactions associated with the debt pay down and refinancing transactions in April 2022. The current year period increased primarily due to higher revenue and operating income as well as lower interest expense.

• Consolidated AEBITDA, a non-GAAP financial measure defined below, was $281 million, an increase of 33% compared to the prior year period, driven by double-digit growth across all of our businesses and margin expansion.

• Net cash provided by operating activities was $34 million compared to combined net cash used in operating activities of $(37) million in the prior year period. The current year period cash flows benefited from lower interest payments, partially offset by $32 million in cash taxes paid related to the Divestitures and $7 million related to professional services associated with the ASX listing, while prior year period combined 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.

• Free cash flow, a non-GAAP financial measure defined below, was $24 million compared to combined free cash flow⁽¹⁾ of $(95) million in the prior year period. The current year period free cash flow was impacted by $32 million in cash taxes paid related to the Divestitures and $7 million related to professional services associated with the ASX listing, while the prior year period combined free cash flow was primarily 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.

• Net debt leverage ratio, a non-GAAP financial measure defined below, was 2.9x as of June 30, 2023 compared to 3.3x as of December 31, 2022, remaining in our targeted net debt leverage ratio⁽¹⁾ range of 2.5x to 3.5x.

First Half 2023 Selected Financial Highlights

• First half consolidated revenue was $1,400 million compared to $1,183 million, up 18% compared to the prior year period driven by double-digit growth across all of our businesses. Gaming revenue increased 19%, driven by robust growth in Gaming machine sales, which grew 46% year-over-year, while SciPlay and iGaming each reached record revenue.

• Net income was $32 million compared to a net loss of $217 million in the prior year period, which included a $147 million loss on financing transactions associated with the debt pay down and refinancing transactions in April 2022. The current year period increased primarily due to higher revenue and operating income as well as lower interest expense.

• Consolidated AEBITDA, a non-GAAP financial measure defined below, was $529 million, an increase of 28% compared to the prior year period, driven by double-digit growth across all of our businesses and margin expansion.

• Adjusted NPATA, a non-GAAP financial measure defined below, was $179 million.