Light & Wonder(US:LNW)2025-05-07 20:36PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements (unaudited) For the three months ended March 31, 2025, Light & Wonder reported total revenues of $774 million, a 2% increase year-over-year, with net income flat at $82 million and diluted EPS rising to $0.94 Consolidated Statements of Operations Revenue for Q1 2025 increased to $774 million, driven by services revenue, while operating income rose slightly to $170 million and net income remained stable at $82 million Consolidated Statements of Operations Highlights (Q1 2025 vs Q1 2024) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Revenue | $774 | $756 | | Services Revenue | $527 | $517 | | Products Revenue | $247 | $239 | | Operating Income | $170 | $165 | | Net Income | $82 | $82 | | Diluted EPS | $0.94 | $0.88 | Consolidated Statements of Comprehensive Income Total comprehensive income for Q1 2025 significantly increased to $125 million, primarily due to a $48 million foreign currency translation gain Comprehensive Income (Q1 2025 vs Q1 2024) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | Net Income | $82 | $82 | | Foreign currency translation gain (loss) | $48 | $(29) | | Total Comprehensive Income | $125 | $59 | Consolidated Balance Sheets As of March 31, 2025, total assets slightly increased to $5.455 billion, while cash and cash equivalents decreased to $134 million and long-term debt rose to $3.884 billion Key Balance Sheet Items | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $134 | $196 | | Total Assets | $5,455 | $5,421 | | Long-term debt, excluding current portion | $3,884 | $3,847 | | Total Liabilities | $4,835 | $4,785 | | Total Stockholders' Equity | $620 | $636 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $185 million in Q1 2025, while significant cash was used in financing activities, primarily for $166 million in stock repurchases Cash Flow Summary (Q1 2025 vs Q1 2024) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $185 | $171 | | Net cash used in investing activities | $(62) | $(71) | | Net cash used in financing activities | $(171) | $(65) | | Purchase of L&W common stock | $(166) | $(25) | | (Decrease) increase in cash, cash equivalents and restricted cash | $(45) | $32 | Notes to Condensed Consolidated Financial Statements Key notes detail the company's three reportable segments, a pending $850 million acquisition, segment performance, $3.9 billion total debt, and $167 million in share repurchases - The company entered into an agreement to acquire Grover Charitable Gaming for $850 million in cash at closing, plus up to $200 million in contingent payments, with the transaction expected to close in Q2 202536 Segment Revenue and AEBITDA (Q1 2025 vs Q1 2024) | Segment | Revenue Q1 2025 (in millions) | Revenue Q1 2024 (in millions) | AEBITDA Q1 2025 (in millions) | AEBITDA Q1 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Gaming | $495 | $476 | $254 | $232 | | SciPlay | $202 | $206 | $64 | $62 | | iGaming | $77 | $74 | $27 | $25 | - Total long-term debt outstanding had a face value of $3.944 billion as of March 31, 2025, and the company upsized its revolving credit facility from $750 million to $1.0 billion in February 20256667 - During Q1 2025, the company repurchased approximately 1.9 million shares of common stock for an aggregate cost of $167 million (including excise tax) under its $1.0 billion share repurchase program82 - As of March 31, 2025, the company had accrued liabilities of $89 million for all legal matters, with an estimated possible loss for certain contingencies up to approximately $13 million in excess of accrued liabilities8788 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported the 16th consecutive quarter of year-over-year consolidated revenue growth, driven by the Gaming segment, alongside strategic acquisitions and capital actions Business Overview The company achieved its 16th consecutive quarter of year-over-year revenue growth, marked by strategic actions including a $1.0 billion revolver upsize, the $850 million Grover Charitable Gaming acquisition, and $167 million in share repurchases - The company delivered its 16th consecutive quarter of year-over-year consolidated revenue growth118 - Announced the strategic acquisition of Grover Charitable Gaming for an upfront consideration of $850 million, expected to close in Q2 2025119 - Amended the LNWI Credit Agreement, upsizing the revolving credit facility to $1.0 billion from $750 million and extending its maturity118 Consolidated Results Consolidated revenue grew 2% year-over-year to $774 million, primarily driven by the Gaming segment, while operating expenses increased due to restructuring and acquisition costs Consolidated Results Summary (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Variance (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $774 | $756 | $18 | 2% | | Total operating expenses | $604 | $591 | $13 | 2% | | Operating income | $170 | $165 | $5 | 3% | | Net income | $82 | $82 | $0 | 0% | - Restructuring and other costs increased by $14 million (233%) to $20 million, primarily due to charges related to the discontinuation of iGaming Live Casino operations ($7 million) and costs associated with the Grover Charitable Gaming acquisition ($5 million)127132 Reportable Business Segment Results The Gaming segment led growth with a 4% revenue increase and expanded AEBITDA margin, while SciPlay revenue declined slightly despite improved monetization, and iGaming revenue grew despite discontinuing Live Casino operations Gaming Segment KPIs (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $495 | $476 | 4% | | AEBITDA Margin | 51% | 49% | +2pp | | U.S. & Canada installed base | 34,501 units | 31,534 units | 9% | | U.S. & Canada new unit shipments | 5,769 units | 4,437 units | 30% | SciPlay Segment KPIs (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $202 | $206 | (2)% | | AEBITDA Margin | 32% | 30% | +2pp | | ARPDAU | $1.06 | $1.01 | 5% | | AMRPPU | $116.96 | $113.93 | 3% | - iGaming revenue increased 4% to $77 million, driven by momentum in North America, with wagers processed through the Open Gaming System increasing to $25.2 billion, despite the company discontinuing its Live Casino operations169166 Liquidity and Capital Resources As of March 31, 2025, the company had total liquidity of $1.084 billion, supported by $185 million in operating cash flow, with significant cash used for share repurchases and the pending Grover Charitable Gaming acquisition Liquidity Position | Component | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $134 | $196 | | Available Revolver Capacity | $950 | $740 | | Total Liquidity | $1,084 | $936 | - Net cash from operating activities increased to $185 million in Q1 2025 from $171 million in Q1 2024182183 - Net cash used in financing activities increased to $171 million, driven by $166 million in share repurchases, partially offset by net borrowings of $40 million on the revolving credit facility28185 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk on its $2.2 billion variable-rate debt, partially mitigated by $700 million in interest rate swap contracts - As of March 31, 2025, the company had $2.2 billion of variable rate debt obligations189 - A hypothetical 1% change in interest rates would result in an approximate $22 million change in annual interest expense189190 - The company utilizes interest rate swap contracts with a total notional amount of $700 million to hedge a portion of its variable rate debt exposure, maturing in April 202771191 Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025193 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls194 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, and details on equity security sales and use of proceeds Item 1. Legal Proceedings This section refers to Note 15 in the Notes to Condensed Consolidated Financial Statements for a detailed discussion of the company's ongoing legal proceedings - For a detailed discussion of legal proceedings, refer to Note 15 of the Condensed Consolidated Financial Statements195 Item 1A. Risk Factors The company highlights that unfavorable economic conditions, trade tariffs, and geopolitical instability could adversely affect its business and operations - Unfavorable economic conditions, including inflation, rising interest rates, and new tariffs, may reduce discretionary spending and negatively affect business results197 - Changes in international trade policy, particularly tariffs on goods from China and Asia, may increase costs and disrupt the supply chain for the Gaming business204205 - Political, economic, and military conditions in Israel could adversely affect SciPlay's personnel and operations in that region201 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 1.9 million shares of common stock for $166 million, with $547 million remaining available under the repurchase program Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | Jan 2025 | 1.2 million | $87.58 | $106 | | Feb 2025 | 0.7 million | $92.43 | $60 | | Mar 2025 | 0 | $109.83 | $0 | | Total | 1.9 million | $87.37 | $166 | - As of March 31, 2025, $547 million remained available for purchase under the company's share repurchase program209