Light & Wonder reaps rewards in Q2 after business ‘transformation’

Light & Wonder President and CEO Barry Cottle has praised the company’s ‘transformation’ during Q2 as it enjoyed a boost in revenue whilst significantly reducing its total debt
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Light & Wonder President and CEO Barry Cottle has praised the company’s ‘transformation’ during Q2 as it enjoyed a boost in revenue whilst significantly reducing its total debt. 

Light & Wonder see benefits of lottery divestiture

Publishing its Q2 results, Light & Wonder highlighted the completion of its lottery divestiture for the transformation, which added $5.7bn in gross cash proceeds to the business. 

Moreover, it expects to conclude the sale of its sports betting division to Endeavor for $750m in cash and $50m in Class A common stock. 

These sales have allowed the group, formerly known as Scientific Games, to clear $4.9bn of debt compared to Q1, with its net debt leverage ratio declining to 3.6x from 6.1x on March 31 – significantly closer to its target of 2.5x to 3.5x.

Cottle commented on Light & Wonder’s divestitures: “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 $5.7bn 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.”

Q2 performance shows signs of growth

Total group revenues for Q2 stood at $610m, up 5% year-over-year from Q2 2021’s $581m, reflecting strong performances in the ‘high growth’ gaming divisions.

Light & Wonder’s gaming revenue grew by 6% YoY to $390m, which is primarily attributed to strong growth across the Gaming Operations division, which exceeded pre-pandemic levels with its record North American premium installed base units sales and average daily revenue per unit. 

Revenue comparatives have been caveated by the prior year VAT recovery benefit of $38m, which reduces the YoY comparability by 13 percentage points. 

The firm’s SciPlay division also saw 4% revenue growth to $160m, which was attributed to the acquisition of Alictus and the market share growth of its core social casino operations. 

Light & Wonder’s igaming operations enjoyed $60m of revenues driven by 47%  growth in the US market. The firm noted that AEBITDA increased 5%, which was helped by the US performance due to its ‘strength of original content and growth in GGR’.

Cottle continued: “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 $70bn TAM. 

“This quarter, we made tangible progress against our strategies as we delivered strong operating momentum and toplined 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.”

Bottom line suffers from debt reduction mechanism

Light & Wonder made a net loss of $150m, swelling from $51m in Q2 of 2021, which was attributed to the $147m losses made on financing transactions, reducing its debt in April and refinancing transactions. 

Additionally, its consolidated AEBITDA declined 9% YoY to $212m before accounting for the prior year comparatives boosted by the VAT recovery benefit. 

Light & Wonder’s CFO Connie James was eager to highlight the positives associated with the reduction of debt, noting the ’incredible transformation’ of its balance sheet. 

“The pace and scale of the business and financial transformation over the past year has been incredible,” James added. “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 of 3.6x – seven 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.”

Returns to shareholders top $200m whilst cash and equivalents grow

With a new look balance sheet, Light & Wonder had available liquidity of $1.9bn at the end of Q2, up from $1.4bn one year ago. $971m of this comes from combined cash and cash equivalents, with the rest made up of remaining revolver capacity, including the SciPLay Revolver.

The firm also disclosed it had returned $203m to shareholders during Q2 through the repurchase of around 3.7 million shares of common stocks, or 27% of total authorization since the start of the program in March. 

Concluding her assessment of the company’s financial performance, James remarked: “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 $4.9bn of debt in the quarter and repurchased $203m 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.”