Light & Wonder used the sale of its lottery business division to pay down debt and grow its other operating segments, the company said in an earnings statement Tuesday.
Light & Wonder reported a net loss of $67 million (72 cents per share) on revenue of $572 million in the quarter ended March 31. In the same quarter of 2021, the company-then known as Scientific Gaming-reported a net loss of $88 million, 98 cents per share, on revenue of $453 million.
“From a balance sheet standpoint, we have made tremendous progress since our last income statement,” CFO Connie James said in the statement. “Following the closing of the lottery sale on April 4, we took advantage of a window in the capital markets and moved quickly to pay down our debt and successfully complete a series of debt refinancing transactions, delivering on our promise to transform our balance sheet.”
Executives attributed the decrease in net loss to higher operating income derived from revenue growth in its three operating segments: gaming, SciPlay and iGaming.
The Influence of Inflation
Investors in the statement asked company officials how inflation and supply chain disruptions were affecting the business. The company said it had invested in supply chain talent more than 18 months ago to prepare for any problems that might arise and, most importantly, to deal with timing issues.
CEO Barry Cottle noted that although the macro environment faces volatile conditions due to inflation, gross gaming revenue was strong in April.
“It really demonstrates, I think, the durability and resilience of our business,” he said. “And we do that whether we look at gaming or iGaming or social. In fact, we’re seeing strong and growing GGR in all three of those markets. And when we have a view of the high end and the low end of the sectors, we’re seeing demand on each side.”
Light & Wonder decided to close the sale of its lottery
Light & Wonder closed the sale of its lottery business to Brookfield Business Partners LP on April 4, generating $5.6 billion in gross cash proceeds. Cottle said the sale gave more financial strength and flexibility to prioritize debt repayment, share repurchases and investment in growth.
Proceeds from the sale of the lottery division were used primarily to pay down debt, officials said. This net funded ratio peaked more than a year ago at 10.5 times and has since dropped to the adjusted net funded ratio of 3.7 times following the lottery sale and refinancing transactions. The company believes it will reach its target ratio of 2.5 to 3.5 times with the sale of its sports betting division. That sale is expected to close in the third quarter and is subject to regulatory approval.
A $750 million share repurchase program was authorized in March and the company has bought back about $140 million of the stock, or about 2.4 million shares, as of last Friday.
Light & Wonder’s SciPlay acquired Alictus, a developer of casual games. In addition, iGaming acquired Playzido, a provider of content creation and gaming platforms.
Light & Wonder’s NASDAQ-listed stock closed Tuesday at $47.66 per share.