Light & Wonder(US:LNW)2021-11-09 21:59Financial Performance - Total revenue for the three months ended September 30, 2021, was $539 million, a 25% increase from $432 million in the same period of 2020[22]. - Net income for the three months ended September 30, 2021, was $187 million, compared to a net loss of $111 million in the same period of 2020[26]. - Operating income for the nine months ended September 30, 2021, was $106 million, a significant improvement from an operating loss of $235 million in the same period of 2020[22]. - Total revenue for the nine months ended September 30, 2021, was $1.572 billion, an increase from $1.219 billion for the same period in 2020, reflecting a 29% growth[74]. - Total revenue for the Gaming business segment was $339 million for the three months ended September 30, 2021, compared to $231 million for the same period in 2020, representing a 47% increase[69]. - AEBITDA for the Gaming segment was $172 million for Q3 2021, up from $77 million in Q3 2020, indicating a significant improvement in profitability[69]. - The company reported a net loss from continuing operations before income taxes of $72 million for Q3 2021, compared to a net loss of $184 million for Q3 2020[69]. - The company experienced a $19 million or 7% increase in revenue from discontinued operations for the three months ended September 30, 2021[183]. - The net income from discontinued operations increased by $11 million or 14% for the three months ended September 30, 2021, due to higher revenue from Lottery and Sports Betting[183]. Expenses and Costs - Research and development expenses increased to $47 million for the three months ended September 30, 2021, up from $36 million in the same period of 2020[22]. - The company incurred restructuring costs of $45 million for the three months ended September 30, 2021, compared to $17 million in the same period of 2020[22]. - Total operating expenses for the same period were $505 million, a 9% increase from $462 million in 2020[174]. - Selling, general and administrative expenses rose by 12% to $164 million for the three months ended September 30, 2021, driven by higher stock-based compensation[176]. - The company incurred restructuring and other costs of $45 million for Q3 2021, compared to $17 million for Q3 2020, reflecting ongoing optimization efforts[79]. Income and Gains - The company recognized a $63 million gain related to the SportCast acquisition transaction for the nine months ended September 30, 2021[23]. - The company reported a net income attributable to SGC of $182 million for the three months ended September 30, 2021, compared to a net loss of $117 million in the same period of 2020[22]. - Total comprehensive income attributable to SGC for the three months ended September 30, 2021, was $155 million, compared to a loss of $85 million in the same period of 2020[26]. - Net income for the nine months ended September 30, 2021, was $291 million, a significant improvement compared to a net loss of $464 million for the same period in 2020[31]. Assets and Liabilities - As of September 30, 2021, total assets decreased to $7.85 billion from $7.98 billion as of December 31, 2020, reflecting a decline of approximately 1.6%[29]. - Total liabilities decreased to $10.04 billion as of September 30, 2021, from $10.51 billion as of December 31, 2020, a reduction of approximately 4.4%[29]. - Cash, cash equivalents, and restricted cash at the end of the period were $901 million, down from $1.141 billion at the end of the previous year[31]. - Total assets as of September 30, 2021, were $5.946 billion, a slight decrease from $6.069 billion as of December 31, 2020[69]. - Total assets of businesses held for sale as of September 30, 2021, were $1.904 billion, slightly down from $1.915 billion at the end of 2020[60]. - Total liabilities of businesses held for sale as of September 30, 2021, were $399 million, down from $435 million at the end of 2020[60]. Cash Flow and Liquidity - The company reported net cash provided by operating activities of $459 million for the nine months ended September 30, 2021, compared to $312 million in the prior year, representing an increase of approximately 47.2%[31]. - The company’s total available liquidity was $1.016 billion as of September 30, 2021, which included $503 million of undrawn availability under SGI's revolving credit facility[40]. - Net cash provided by operating activities from continuing operations was $199 million for the nine-month period, a significant increase from $2 million in the previous year[226]. - The company made a voluntary payment of $135 million on SGI's revolving credit facility, leaving the entire facility undrawn and available[224]. Acquisitions and Divestitures - The company announced the divestiture of its Lottery and Sports Betting businesses, with total consideration for the Lottery business at $6.05 billion, including $5.825 billion in cash[33]. - The company expects to complete the divestiture transactions during the first half of 2022, subject to regulatory approvals[33]. - In July 2021, the company proposed to acquire the remaining 19% equity interest in SciPlay, aligning with its strategic review[35]. - The company completed several acquisitions, including Koukoi Games Oy and Lightning Box Games, enhancing its offerings in the mobile and iGaming sectors[44][45]. - Total consideration for acquisitions related to continuing operations was $60 million, with $39 million allocated to goodwill[48]. Legal and Regulatory Matters - A putative class action complaint was filed against Scientific Games Corporation (SGC) in Washington, seeking unspecified damages for alleged violations of gambling laws related to virtual coins in online casino games[140]. - The TCS John Huxley matter involves federal antitrust claims against SGC, alleging an illegal monopoly in the market for automatic card shufflers, with ongoing litigation and no current estimate of possible losses[141]. - The Tonkawa Tribe matter includes federal antitrust claims against SGC for creating an alleged monopoly in card shufflers, with the plaintiffs seeking unspecified damages and costs[142][143]. - Casino Queen filed a putative class action against SGC for alleged antitrust violations related to automatic card shufflers, seeking unspecified damages and costs[144]. - SGI, a subsidiary of SGC, faces claims from Ecosalud in Colombia, with a potential liability of approximately $30.2 million plus interest, although the company believes it has defenses against these claims[148][149]. - The SciPlay IPO matters involve multiple putative class actions in New York and Nevada, with claims for violations of the Securities Act and potential compensatory damages of at least $146 million[150][151]. - SGC recorded approximately $8 million in accrued liabilities related to the SciPlay IPO matters, with no material impact on its financial statements for the periods ended September 30, 2021[152]. Tax and Accounting - The company recognized an income tax benefit of $181 million in the three months ended September 30, 2021, due to the reversal of valuation allowances on U.S. deferred income tax assets[129]. - The effective tax rate for the company in 2021 differed from the U.S. statutory rate of 21% primarily due to the release of certain valuation allowances[132]. - The company adopted new accounting guidance related to leases in the third quarter of 2021, which did not have a material effect on consolidated financial statements[53]. - The company does not expect any other recently issued accounting guidance to have a significant effect on its consolidated financial statements[55]. Market and Operational Insights - iGaming revenues increased due to growth in the U.S. market, with a market share of 27% across five states[172]. - The company continues to face supply chain challenges that may impact the fulfillment of orders and revenue recognition[189]. - Average Daily Active Users (DAU) decreased for both comparable periods, while Average Revenue Per DAU (ARPDAU) increased due to lower average DAU[208]. - The acquisition of Lightning Box in August 2021 expanded the iGaming content portfolio, and the acquisition of Authentic Gaming in November 2021 enhanced premium product offerings[214][215].