Light & Wonder(US:LNW)2024-05-08 20:40PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (unaudited) The unaudited financial statements for Q1 2024 show significant revenue and net income growth, with total assets at $5.59 billion Consolidated Statements of Income Q1 2024 income statements show total revenue of $756 million and net income of $82 million, reflecting strong growth Consolidated Statements of Income (Three Months Ended March 31) | Metric | 2024 (in millions) | 2023 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $756 | $670 | +13% | | Operating Income | $165 | $102 | +62% | | Net Income Attributable to L&W | $82 | $22 | +273% | | Diluted EPS Attributable to L&W | $0.88 | $0.23 | +283% | Consolidated Balance Sheets As of March 31, 2024, total assets reached $5.588 billion, with liabilities at $4.753 billion and equity at $835 million Consolidated Balance Sheet Highlights | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Assets | $5,588 | $5,552 | | Cash and cash equivalents | $450 | $425 | | Goodwill | $2,925 | $2,945 | | Total Liabilities | $4,753 | $4,787 | | Long-term debt, excluding current portion | $3,852 | $3,852 | | Total Stockholders' Equity | $835 | $765 | Condensed Consolidated Statements of Cash Flows Q1 2024 cash flow shows $171 million from operations, $71 million used in investing, and $65 million in financing Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $171 | $185 | | Net cash used in investing activities | $(71) | $(57) | | Net cash used in financing activities | $(65) | $(65) | | Increase in cash, cash equivalents and restricted cash | $32 | $63 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, segment performance, $3.9 billion debt, and legal contingencies with potential losses up to $13 million - The company operates in three business segments: Gaming, SciPlay, and iGaming. The primary measure of profit for these segments is Adjusted EBITDA (AEBITDA)324546 Revenue by Business Segment (Three Months Ended March 31) | Segment | 2024 Revenue (in millions) | 2023 Revenue (in millions) | | :--- | :--- | :--- | | Gaming | $476 | $419 | | SciPlay | $206 | $186 | | iGaming | $74 | $65 | | Total | $756 | $670 | - As of March 31, 2024, the company had total outstanding debt with a face value of $3.9 billion, primarily consisting of a $2.2 billion variable-rate Term Loan B and various senior unsecured notes67 - The company estimates a range of possible loss for certain legal contingencies up to approximately $13 million in excess of accrued liabilities91 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024's 13% revenue growth across all segments, 62% operating income increase, and strong $1.19 billion liquidity Consolidated Results Q1 2024 consolidated revenue grew 13% to $756 million, with operating income up 62% to $165 million Consolidated Results Summary (Q1 2024 vs Q1 2023) | Metric (in millions) | Q1 2024 | Q1 2023 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $756 | $670 | $86 | 13% | | Operating Income | $165 | $102 | $63 | 62% | | Net Income | $82 | $27 | $55 | 204% | - The increase in operating expenses was driven by higher SG&A ($26M) and R&D ($8M), partially offset by lower D&A (-$15M) and Restructuring costs (-$13M)127129130 Business Segment Results All segments showed strong revenue growth, with Gaming up 14% to $476 million, SciPlay 11% to $206 million, and iGaming 14% to $74 million Segment Revenue and AEBITDA (Q1 2024) | Segment | Revenue (in millions) | AEBITDA (in millions) | AEBITDA Margin | | :--- | :--- | :--- | :--- | | Gaming | $476 | $232 | 49% | | SciPlay | $206 | $62 | 30% | | iGaming | $74 | $25 | 34% | - Gaming growth was driven by a 26% increase in total new unit shipments, with a notable 45% rise in international shipments140 - SciPlay's performance was highlighted by a record ARPDAU of $1.01, up 13% YoY, and a 17% increase in Average Monthly Revenue Per Paying User (AMRPPU)125156161 - iGaming processed $22 billion in wagers through its Open Gaming System during the quarter169 Liquidity, Capital Resources and Working Capital Total liquidity was $1.19 billion as of March 31, 2024, with $171 million from operations and $25 million in share repurchases Cash and Available Revolver Capacity (in millions) | Component | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $450 | $425 | | Available Revolver Capacity | $740 | $740 | | Total | $1,190 | $1,165 | - Net cash provided by operating activities decreased to $171 million from $185 million in Q1 2023, primarily due to unfavorable changes in working capital178179180 - The company repurchased 0.2 million shares of common stock for an aggregate cost of $25 million during the quarter178 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on $2.2 billion variable-rate debt, mitigated by $700 million in interest rate swaps - The company has $2.2 billion of variable-rate debt obligations that fluctuate based on SOFR186 - A hypothetical 1% change in interest rates would change annual interest expense by approximately $22 million, excluding the impact of hedges186 - The company hedges a portion of its variable rate debt with interest rate swap contracts on a total notional amount of $700 million, which mature in April 202718772 Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of March 31, 2024189 - No material changes were made to internal controls over financial reporting during the quarter ended March 31, 2024190 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, with details available in Note 15 of the financial statements - For a full discussion of legal proceedings, refer to Note 15 in the Notes to Condensed Consolidated Financial Statements191 Risk Factors No material changes to the company's risk factors were reported compared to the 2023 Annual Report on Form 10-K - No material changes in risk factors were reported compared to those disclosed in the 2023 10-K192 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 0.25 million shares for $25 million in Q1 2024, with $150 million remaining for future repurchases Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased (millions) | Average Price Paid per Share | Total Cost (in millions) | Approx. Value Remaining for Purchase (in millions) | | :--- | :--- | :--- | :--- | :--- | | Jan 2024 | — | — | — | $175 | | Feb 2024 | — | — | — | $175 | | Mar 2024 | 0.25 | $101.04 | $25 | $150 | | Total | 0.25 | $101.04 | $25 | $150 | Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2024 - During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement198 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and CEO/CFO certifications - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as Inline XBRL documents200