Light & Wonder, Inc. Reports Third Quarter 2023 Results

Ten Consecutive Quarters of Consolidated Revenue Growth Delivering Increase of 13% Year-Over-Year

Double-Digit Growth Across all Businesses Driving Strong Cash Flow Generation

Maintained Healthy Balance Sheet, Strong Financial Profile and Extended 2025 Debt Maturity to 2031

Returned $112 Million of Capital to Shareholders Through Share Repurchases During the Quarter

Added to the S&P/ASX 200 Index and Closed Merger with SciPlay During the Fourth Quarter of 2023

Light & Wonder, Inc. (NASDAQ and ASX: LNW) (“Light & Wonder,” “L&W,” “we,” or the “Company”) today reported results for the third quarter ended September 30, 2023.

We maintained strong momentum in the third quarter and delivered a tenth consecutive quarter of consolidated revenue growth and fifth consecutive quarter of double-digit growth year-over-year. Consolidated revenue in the quarter grew 13%, maintaining strong margins and cash flow generation as we continued advancing toward our long-term financial targets. The growth was driven by double-digit growth across all of our businesses, including a fifth consecutive quarter of record revenues for SciPlay, and iGaming revenue held at record level:

• Gaming revenue increased 11% compared to the prior year period to $465 million, primarily due to continued momentum in Gaming machine sales, which increased 23% driven by growth in North American and Australian machine sales, coupled with strong performance in North American Gaming operations and Table products.
• SciPlay achieved another quarter of record revenue of $196 million, a 15% increase compared to the prior year period, driven by the core social casino business, maintaining strong payer metrics and once again outpacing the market and gaining share.
• iGaming revenue held at record quarterly level of $70 million, a 21% increase from the prior year period, driven by growth both in the U.S. and international markets.

During the quarter, we returned $112 million of capital to shareholders through share repurchases, and we successfully refinanced $550 million of senior unsecured notes, extending their maturity from 2025 to 2031. On October 23, 2023, we closed the SciPlay merger transaction and acquired the remaining 17% equity interest in SciPlay not already owned by L&W, completing another critical strategic milestone.

Matt Wilson, President and Chief Executive Officer of Light & Wonder, said, “Our tremendous team at Light & Wonder continues to deliver exceptional results with double-digit growth across all three of our businesses for the fourth consecutive quarter. Additionally, we also reached two significant milestones, which included closing the SciPlay transaction and inclusion into the ASX 200 index in Australia. We had successful showings at both the Australasian and Global Gaming Expos with the strength of our product portfolio on full display. The positive feedback we received on our wide range of cabinets and games further validates our focused investment in R&D and vision for the future of the Company. We will continue to capitalize on this momentum, as evidenced by the talent acquisition efforts we’ve recently accomplished. Coming out of G2E, our conviction has never been higher that we will reach our full potential as we approach the end of 2023.”

Oliver Chow, Interim Chief Financial Officer of Light & Wonder, added, “This quarter demonstrated our commitment to growing the business and maintaining healthy margins. Our business segments’ AEBITDA are at their highest levels in 2023 as we continue to stay intensely focused on executing on our strategy while driving margin enhancement initiatives. Our commitment to operational efficiencies coupled with strong top line growth enabled us to generate significant cash flow. We have a strong financial profile and capital structure, which positions us well in our current growth stage, providing us with flexibility to invest as we advance toward our strategic and financial goals.”

LEVERAGE, CAPITAL RETURN, AND STRATEGY UPDATE

• Principal face value of debt outstanding⁽¹⁾ of $3.9 billion, translating to net debt leverage ratio⁽²⁾ of 2.8x, within our targeted net debt leverage ratio⁽²⁾ range of 2.5x to 3.5x, as of September 30, 2023, a decrease of 0.5x from December 31, 2022, and the lowest level in the Company’s recent history.
• Extended 2025 debt maturity to 2031 — During the quarter, we issued $550 million of 7.500% senior unsecured notes due 2031 and redeemed all $550 million of our outstanding 8.625% senior unsecured notes due in 2025, resulting in an approximately $6 million reduction in annualized cash interest costs.
• Returned $112 million of capital to shareholders through the repurchase of approximately 1.5 million shares of L&W common stock during the quarter. Since the initiation of the program, we have returned $550 million of capital to shareholders through the repurchase of approximately 9.1 million shares of L&W common stock, representing 73% of total program authorization.
• Added to the S&P/ASX 200 Index as of October 18, 2023 — The Company’s common stock, which is listed as CHESS Depositary Interests (CDIs) on the ASX, was added to the S&P/ASX 200 Index, continuing to enhance the Company’s profile with Australian investors.
• Closed SciPlay merger transaction on October 23, 2023, acquiring the remaining approximately 17% equity interest not already owned by L&W for $496 million (excluding transaction and advisory fees), resulting in SciPlay becoming a wholly owned subsidiary of L&W (the “SciPlay Merger”). The Company believes that this transaction will enable seamless collaboration with SciPlay that will add further momentum to the Company’s already robust cross-platform strategy, provide flexibility for use of SciPlay cash flows for investments across the enterprise, and facilitate long-term margin enhancement opportunities via synergies, all of which are expected to increase long-term shareholder value.

SUMMARY RESULTS

Unless otherwise noted, amounts, percentages and discussion included below reflect the results of operations and financial condition of the Company’s continuing operations, which includes its Gaming, SciPlay and iGaming businesses. We have reflected our former Lottery business (disposed during the second quarter of 2022) and Sports Betting business (disposed during the third quarter of 2022) (collectively referred to as the “Divestitures”) as discontinued operations.

Third Quarter 2023 Financial Highlights

• Third quarter consolidated revenue was $731 million compared to $648 million, up 13% compared to the prior year period driven by double-digit growth across all of our businesses, representing a tenth consecutive quarter of growth. Gaming revenue increased 11%, driven by another quarter of robust growth in Gaming machine sales, which grew 23% year-over-year, while SciPlay reached another quarterly record and iGaming revenue held at record quarterly level.
• Net income was $80 million compared to $20 million in the prior year period. The current year period increased primarily due to higher revenue and operating income as well as a non-cash foreign currency transaction gain included in other income, net, partially offset by $15 million loss on financing transactions associated with the issuance of 2031 unsecured notes and redemption of 2025 unsecured notes in August of 2023.
• Consolidated AEBITDA, a non-GAAP financial measure defined below, was $286 million, an increase of 22% compared to the prior year period, driven by double-digit growth and margin expansion across all of our businesses.
• Adjusted NPATA, a non-GAAP financial measure defined below, was $99 million.
• Net cash provided by operating activities was $204 million compared to combined net cash used in operating activities of $(351) million in the prior year period. The prior year period combined cash flows were primarily impacted by $465 million in cash taxes paid related to the divestiture of the Lottery business, coupled with a $25 million SciPlay legal settlement payment during the quarter.
• Free cash flow, a non-GAAP financial measure defined below, was $123 million compared to combined free cash flow⁽¹⁾ of $(420) million in the prior year period. The prior year period combined free cash flow was primarily impacted by $465 million in cash taxes paid related to the divestiture of the Lottery business, coupled with a $25 million SciPlay legal settlement payment during the quarter.
• Net debt leverage ratio, a non-GAAP financial measure defined below, was 2.8x as of September 30, 2023 compared to 3.3x as of December 31, 2022, remaining in our targeted net debt leverage ratio⁽¹⁾ range of 2.5x to 3.5x.

Third Quarter 2023 Business Segments Key Highlights

• Gaming revenue increased 11% to $465 million compared to the prior year period, led by continued momentum in Gaming machine sales, growing 23%. Gaming operations maintained elevated average daily revenue per unit, while Table products continued strong momentum increasing 17% compared to the prior year period. Gaming AEBITDA was $235 million, up 16% compared to the prior year period with AEBITDA margin improving three percentage points, primarily driven by favorable revenue mix as well as margin enhancement initiatives.
• Gaming operations revenue continues to benefit from year-over-year growth in our North American installed base placements and average daily revenue per unit, as a result of strong content performance and the continued success of our COSMIC™ and MURAL^® cabinets, validating our continued investment in our R&D engine to drive long-term growth. Our North American premium installed base has grown for the 13^th consecutive quarter, representing 47% of our total installed base mix, while revenue per day remained at elevated levels.
• SciPlay revenue increased 15% to $196 million compared to the prior year period, breaking another record. SciPlay AEBITDA was $61 million, up 42% compared to the prior year period with AEBITDA margin improving six percentage points, reflective of continuing revenue growth and lower marketing spend. Growth was primarily driven by the core social casino business, which delivered strong payer metrics and once again outpaced the market and gained share. Payer conversion rates increased year-over-year to 10.6%, while ARPDAU⁽¹⁾ grew 20% to a record $0.96 and AMRPPU⁽²⁾ grew 12%, reaching a record $106.61. The third quarter performance continues to demonstrate strong player engagement and monetization leveraging game content, dynamic Live Ops and effective marketing strategies.
• iGaming revenue increased 21% to $70 million and held at record quarterly revenue, and AEBITDA was $25 million compared to $20 million in the prior year period. The revenue and AEBITDA increases were driven by growth in the U.S. and international markets and benefited from $3 million in certain termination fees. The U.S. market delivered 25% year-over-year revenue growth, driven in part by our continued strength in our land-based original content launches and scaling third party aggregation on our platform. In October 2023, we launched our live casino operations in Michigan, reaching a strategic market expansion milestone for our iGaming business.
• Consolidated capital expenditures were $70 million in the third quarter of 2023.

Earnings Conference Call

As previously announced, Light & Wonder executive leadership will host a conference call on Thursday, November 9, 2023, at 4:30 p.m. EDT to review the Company’s third quarter results. To access the call live via a listen-only webcast and presentation, please visit explore.investors.lnw.com and click on the webcast link under the Events and Presentations section. To access the call by telephone, please dial: +1 (833) 470-1428 for U.S., +61 2 7908-3093 for Australia or +1 (646) 904-5544 for International and ask to join the Light & Wonder call using conference ID: 449920. A replay of the webcast will be archived in the Investors section on www.lnw.com.

About Light & Wonder

Light & Wonder, Inc. is a global leader in cross-platform games and entertainment. The Company brings together approximately 6,000 employees from six continents to connect content between land-based and digital channels with unmatched technology and distribution. Guided by a culture that values daring teamwork and creativity, the Company builds new worlds of play, developing game experiences loved by players around the globe. Its OPENGAMING^® platform powers the largest digital-gaming network in the industry. The Company is committed to the highest standards of integrity, from promoting player responsibility to implementing sustainable practices. To learn more, visit www.lnw.com.

You can access our filings with the Securities Exchange Commission (“SEC”) through the SEC website at www.sec.gov, with the Australian Stock Exchange (“ASX”) through the ASX website at www.asx.com.au or through our website, and we strongly encourage you to do so. We routinely post information that may be important to investors on our website at explore.investors.lnw.com, and we use our website as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (“Reg FD”).

The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document, and shall not be deemed “filed” under the Securities Exchange Act of 1934, as amended.

All ® notices signify marks registered in the United States. © 2023 Light & Wonder, Inc. and/or their respective affiliates. All Rights Reserved.

Forward-Looking Statements

In this press release, Light & Wonder makes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “target,” “should,” “could,” “potential,” “opportunity,” “goal,” or similar terminology. These statements are based upon Management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other factors, including, among other things:

• our inability to successfully execute our strategy and rebranding initiative;
• slow growth of new gaming jurisdictions, slow addition of casinos in existing jurisdictions and declines in the replacement cycle of gaming machines;
• risks relating to foreign operations, including anti-corruption laws, fluctuations in currency rates, restrictions on the payment of dividends from earnings, restrictions on the import of products and financial instability;
• difficulty predicting what impact, if any, new tariffs imposed by and other trade actions taken by the U.S. and foreign jurisdictions could have on our business;
• U.S. and international economic and industry conditions, including increases in benchmark interest rates and the effects of inflation;
• public perception of our response to environmental, social and governance issues;
• changes in, or the elimination of, our share repurchase program;
• resulting pricing variations and other impacts of our common stock being listed to trade on more than one stock exchange;
• level of our indebtedness, higher interest rates, availability or adequacy of cash flows and liquidity to satisfy indebtedness, other obligations or future cash needs;
• inability to further reduce or refinance our indebtedness;
• restrictions and covenants in debt agreements, including those that could result in acceleration of the maturity of our indebtedness;
• competition;
• inability to win, retain or renew, or unfavorable revisions of, existing contracts, and the inability to enter into new contracts;
• risks and uncertainties of potential changes in U.K. gaming legislation, including any new or revised licensing and taxation regimes, responsible gambling requirements and/or sanctions on unlicensed providers;
• inability to adapt to, and offer products that keep pace with, evolving technology, including any failure of our investment of significant resources in our R&D efforts;
• the possibility that we may be unable to achieve expected operational, strategic and financial benefits of the SciPlay Merger;
• the outcome of any legal proceedings that may be instituted following completion of the SciPlay Merger;
• failure to retain key management and employees of SciPlay;
• unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, war, armed conflicts or hostilities or the COVID-19 pandemic, the impact such events may have on our customers, suppliers, employees, consultants, business partners or operations, as well as management’s response to any of the aforementioned factors;
• changes in demand for our products and services;
• dependence on suppliers and manufacturers;
• SciPlay’s dependence on certain key providers;
• ownership changes and consolidation in the gaming industry;
• fluctuations in our results due to seasonality and other factors;
• security and integrity of our products and systems, including the impact of any security breaches or cyber-attacks;
• protection of our intellectual property, inability to license third-party intellectual property and the intellectual property rights of others;
• reliance on or failures in information technology and other systems;
• litigation and other liabilities relating to our business, including litigation and liabilities relating to our contracts and licenses, our products and systems, our employees (including labor disputes), intellectual property, environmental laws and our strategic relationships;
• reliance on technological blocking systems;
• challenges or disruptions relating to the completion of the domestic migration to our enterprise resource planning system;
• laws and government regulations, both foreign and domestic, including those relating to gaming, data privacy and security, including with respect to the collection, storage, use, transmission and protection of personal information and other consumer data, and environmental laws, and those laws and regulations that affect companies conducting business on the internet, including online gambling;
• legislative interpretation and enforcement, regulatory perception and regulatory risks with respect to gaming, especially internet wagering, social gaming and sports wagering;
• changes in tax laws or tax rulings, or the examination of our tax positions;
• opposition to legalized gaming or the expansion thereof and potential restrictions on internet wagering;
• significant opposition in some jurisdictions to interactive social gaming, including social casino gaming and how such opposition could lead these jurisdictions to adopt legislation or impose a regulatory framework to govern interactive social gaming or social casino gaming specifically, and how this could result in a prohibition on interactive social gaming or social casino gaming altogether, restrict our ability to advertise our games, or substantially increase our costs to comply with these regulations;
• expectations of shift to regulated digital gaming or sports wagering;
• inability to develop successful products and services and capitalize on trends and changes in our industries, including the expansion of internet and other forms of digital gaming;
• the continuing evolution of the scope of data privacy and security regulations, and our belief that the adoption of increasingly restrictive regulations in this area is likely within the U.S. and other jurisdictions;
• incurrence of restructuring costs;
• goodwill impairment charges including changes in estimates or judgments related to our impairment analysis of goodwill or other intangible assets;
• stock price volatility;
• failure to maintain adequate internal control over financial reporting;
• dependence on key executives;
• natural events that disrupt our operations, or those of our customers, suppliers or regulators; and
• expectations of growth in total consumer spending on social casino gaming.

Additional information regarding risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated in forward-looking statements is included from time to time in our filings with the SEC, including the Company’s current reports on Form 8-K, quarterly reports on Form 10-Q and its latest Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2022 on March 1, 2023 (including under the headings “Forward Looking Statements” and “Risk Factors”). Forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no and expressly disclaim any obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

You should also note that this press release may contain references to industry market data and certain industry forecasts. Industry market data and industry forecasts are obtained from publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. Although we believe industry information to be accurate, it is not independently verified by us and we do not make any representation as to the accuracy of that information. In general, we believe there is less publicly available information concerning the international gaming, social and digital gaming industries than the same industries in the U.S.

Due to rounding, certain numbers presented herein may not precisely recalculate.