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Light & Wonder (LNW) Q1 Loss Wider Than Expected, Revenues Top

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Light & Wonder, Inc. LNW, erstwhile known as Scientific Games Corporation, reported mixed first-quarter 2022 results, with the bottom line missing the Zacks Consensus Estimate but the top line beating the same. With the divesture of the Lottery business, it has rebranded its corporate name from Scientific Games Corporation to Light & Wonder to better align with its vision of being a leading cross-platform global gaming firm.

Quarter in Detail

The company recorded a net loss (from continuing operations) of $67 million or a loss of 72 cents per share, compared with a net loss of $88 million or a loss of 98 cents per share in the year-ago quarter. The reported loss was wider than the Zacks Consensus Estimate of a loss of 41 cents.

Light & Wonder, Inc. Price, Consensus and EPS Surprise

Light & Wonder, Inc. Price, Consensus and EPS Surprise
Light & Wonder, Inc. Price, Consensus and EPS Surprise

Light & Wonder, Inc. price-consensus-eps-surprise-chart | Light & Wonder, Inc. Quote

Total revenues in first-quarter 2022 improved 26.3% year over year to $572 million, driven by solid growth in the Gaming business. The top line beat the consensus estimate of $554 million. Services revenues rose 18.4% year over year to $431 million, while product sales grew 58.4% to $155 million.

Gaming revenues (62.1% of total revenues) surged 45% year over year to $355 million, driven by growth in Gaming operations due to an increase in premium installed base and growth in Game Sales and Table Games business. The gaming business improved significantly with the gradual post-pandemic market revival.

SciPlay revenues (27.6% of revenues) grew 5% year over year to $158 million, driven by an increase in average monthly paying users. iGaming (10.3% of revenues) revenues increased 2% year over year to $58 million, aided by the strength of its original content in the U.S. market and a solid contribution from acquired businesses.

Consolidated adjusted EBITDA (AEBITDA) surged 42% year over year to $202 million. AEBITDA margin was 35%, slightly higher than 31% reported in the year-ago quarter.

Notable Developments

During the quarter, the company acquired Alictus, a Turkey-based hyper-casual game studio. The transaction is expected to expand SciPlay’s business in the casual gaming market and extend its gaming pipeline. It is also likely to diversify Light & Wonder’s revenue stream and fulfill its objective to be a diversified global game developer.

Cash Flow & Liquidity

In first-quarter 2022, the company utilized $14 million of cash in operating activities against a cash flow of $25 million a year ago. As of Mar 31, 2022, it had $582 million in cash and cash equivalents with $8,833 million of long-term debt.

The company significantly de-levered its balance sheet with the divesture of the Lottery business in April 2022, resulting in gross proceeds of $5.6 billion. Consequently, adjusted outstanding debt as of Apr 14, 2022 declined to $4 billion and the adjusted net debt leverage ratio decreased to 3.7x from 10.5x about 15 months ago. Light & Wonder aims to reach its net debt leverage ratio target of 2.5x-3.5x with the divesture of the Sports Betting business later in the year. The company repurchased 2.4 million shares through May 6, 2022 to return $140 million of capital to the shareholders.

Zacks Rank & Stocks to Consider

Light & Wonder currently has a Zacks Rank #3 (Hold).

Clearfield, Inc. CLFD, sporting a Zacks Rank #1 (Strong Buy), is a solid pick for investors in the broader industry. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered an earnings surprise of 37.5%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 114.7% since May 2021. Over the past year, Clearfield has gained a solid 45.4%.

InterDigital, Inc. IDCC also sports a Zacks Rank #1. It has a long-term earnings growth expectation of 15% and delivered a stellar earnings surprise of 141.1%, on average, in the trailing four quarters. Earnings estimates for the current year have moved up 88.5% since May 2021.

InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and the ability to penetrate different markets are impressive.

Viasat, Inc. VSAT, carrying a Zacks Rank #2, is another key pick. It pulled off a trailing four-quarter earnings surprise of 129.9%, on average. The company attracts millions of U.S. consumers and enterprises with its high-quality broadband service.

Viasat’s impressive bandwidth productivity sets it apart from conventional and lower-yield satellite providers that run on incumbent business models. Viasat has a competitive advantage in bandwidth economics, global coverage, flexibility and bandwidth allocation, making it believe that mobile broadband will act as a profit churner.


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