scpl-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38889

SCIPLAY CORPORATION

(Exact name of registrant as specified in its charter)


Nevada						83-2692460
(State or other jurisdiction of						(I.R.S. Employer Identification No.)
incorporation or organization)

6601 Bermuda Road, Las Vegas, Nevada 89119

(Address of principal executive offices)

(Zip Code)

(702) 897-7150

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $.001 par value	SCPL	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant has the following number of shares outstanding of each of the registrant’s classes of common stock as of May 4, 2023:

Class A Common Stock: 21,242,497

Class B Common Stock: 103,547,021

SCIPLAY CORPORATION

INDEX TO FINANCIAL INFORMATION

AND OTHER INFORMATION

THREE MONTHS ENDED MARCH 31, 2023


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	6

	Consolidated Statements of Income for the Three Months Ended March 31, 2023 and 2022	6

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022	7

	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	8

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022	9

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	10

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

FORWARD-LOOKING STATEMENTS

Throughout this Quarterly Report on Form 10-Q, we make “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. The forward-looking statements contained in this Quarterly Report on Form 10-Q are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. 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:

•the effects of the COVID-19 pandemic and any resulting social, political, economic and financial complications;

•our ability to attract and retain players;

•expectations of growth in total consumer spending on social gaming, including social casino gaming;

•our reliance on third-party platforms and our ability to track data on those platforms;

•our ability to continue to launch and enhance games that attract and retain a significant number of paying players;

•our ability to expand in international markets;

•our reliance on a small percentage of our players for nearly all of our revenue;

•our ability to adapt to, and offer games that keep pace with, changing technology and evolving industry standards;

•competition;

•our dependence on the optional purchases of coins, chips and bingo cards (collectively referred to as “coins, chips and cards”) to supplement the availability of periodically offered free coins, chips and cards;

•our ability to access additional financing and restrictions and covenants in debt agreements, including those that could result in acceleration of the maturity of our indebtedness;

•the discontinuation or replacement of the London Interbank Offer Rate, which may adversely affect interest rates;

•fluctuations in our results due to seasonality and other factors;

•dependence on skilled employees with creative and technical backgrounds;

•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;

•our ability to use the intellectual property rights of Light & Wonder, Inc. (“Light & Wonder”, “L&W” and “Parent”) and other third parties, including the third-party intellectual property rights licensed to Light & Wonder, under our intellectual property license agreement (“IP License Agreement”) with our Parent;

•protection of our proprietary information and intellectual property, inability to license third-party intellectual property and the intellectual property rights of others;

•security and integrity of our games and systems;

•security breaches, cyber-attacks or other privacy or data security incidents, challenges or disruptions;

•reliance on or failures in information technology and other systems;

•loss of revenue due to unauthorized methods of playing our games;

•the impact of legal and regulatory restrictions on our business, including 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;

•laws and government regulations, both foreign and domestic, including those relating to our Parent and to data privacy and security, including with respect to the collection, storage, use, transmission, sharing and protection of personal information and other consumer data, and those laws and regulations that affect companies conducting business on the internet, including ours;

•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;

•risks related to foreign operations, including the complexity of foreign laws, regulations and markets; the uncertainty of enforcement of remedies in foreign jurisdictions; the effect of currency exchange rate fluctuations; the impact of foreign labor laws and disputes; the ability to attract and retain key personnel in foreign jurisdictions; the economic, tax and regulatory policies of local governments; and compliance with applicable anti-money laundering, anti-bribery and anti-corruption laws;

•influence of certain stockholders, including decisions that may conflict with the interests of other stockholders;

•our ability to achieve some or all of the anticipated benefits of being a standalone public company;

•our dependence on distributions from SciPlay Parent Company, LLC (“SciPlay Parent LLC”) to pay our taxes and expenses, including substantial payments we will be required to make under the Tax Receivable Agreement (the “TRA”);

•failure to establish and maintain adequate internal control over financial reporting;

•stock price volatility;

•litigation and other liabilities relating to our business, including litigation and liabilities relating to consumer protection, gambling-related matters, employee matters, alleged service and system malfunctions, alleged intellectual property infringement and claims relating to our contracts, licenses and strategic investments;

•our ability to complete acquisitions and integrate businesses successfully;

•our ability to pursue and execute new business initiatives;

•our expectations of future growth that will place significant demands on our management and operations;

•natural events and health crises that disrupt our operations or those of our providers or suppliers;

•changes in tax laws or tax rulings, or the examination of our tax positions;

•levels of insurance coverage against claims; and

•our dependence on certain key providers.

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 annual reports on Form 10-K, including the latest annual report filed with the SEC on March 1, 2023 (“2022 Form 10-K”) (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.

This Quarterly Report on Form 10-Q 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 international social gaming industries than the same industries in the U.S. Some data is also based on our good faith estimates, which are derived from our review of internal surveys or data, as well as the independent sources referenced above. Assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our 2022 Form 10-K. These and other factors could cause future performance to differ materially from our assumptions and estimates.

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

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

SCIPLAY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in millions, except per share amounts)



	Three Months Ended
	March 31,
		2023		2022
Revenue		$	186.4	$	158.0
Operating expenses:
Cost of revenue(1)		57.7		48.2
Sales and marketing(1)		46.9		40.0
General and administrative(1)		22.1		16.7
Research and development(1)		12.7		11.5
Depreciation and amortization		5.9		4.7
Restructuring and other		1.4		2.2
Operating income		39.7		34.7
Other income (expense), net		6.0		(0.5)
Net income before income taxes		45.7		34.2
Income tax expense		3.9		2.2
Net income		41.8		32.0
Less: Net income attributable to the noncontrolling interest		36.3		27.6
Net income attributable to SciPlay		$	5.5	$	4.4

Basic and diluted net income attributable to SciPlay per share:
Basic		$	0.25	$	0.18
Diluted		$	0.24	$	0.18

Weighted average number of shares of Class A common stock used in per share calculation:
Basic shares		22.0		24.6
Diluted shares		23.0		24.8
(1) Excludes depreciation and amortization.

See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in millions)



	Three Months Ended
	March 31,
		2023		2022
Net income		$	41.8	$	32.0
Other comprehensive loss:
Foreign currency translation loss, net of tax		(1.5)		(1.6)
Total comprehensive income		40.3		30.4
Less: Comprehensive income attributable to the noncontrolling interest		35.1		26.3
Comprehensive income attributable to SciPlay		$	5.2	$	4.1


















See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except par value)



	As of
	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	357.5	$	330.1
Accounts receivable, net	64.2		51.0
Prepaid expenses and other current assets	7.3		8.0
Total current assets	429.0		389.1
Property and equipment, net	3.6		3.0
Operating lease right-of-use assets	4.2		4.8
Goodwill	216.1		217.6
Intangible assets and software, net	79.6		74.8
Deferred income taxes	72.3		74.5
Other assets	1.7		1.9
Total assets	$	806.5	$	765.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	20.7	$	18.4
Accrued liabilities	37.9		35.2
Due to affiliate	4.0		3.8
Total current liabilities	62.6		57.4

Operating lease liabilities	2.4		3.1
Liabilities under TRA	60.2		60.2
Other long-term liabilities	26.0		29.4
Total liabilities	151.2		150.1
Commitments and contingencies (see Note 8)
Stockholders’ equity:
Class A common stock, par value $0.001 per share, 625.0 shares authorized, 25.2 and 24.9 shares issued, 21.9 and 22.1 shares outstanding as of March 31, 2023 and December 31, 2022, respectively	—		—
Class B common stock, par value $0.001 per share, 130.0 shares authorized, 103.5 shares issued and outstanding as of March 31, 2023 and December 31, 2022	0.1		0.1
Additional paid-in capital	80.5		72.0
Retained earnings	80.1		74.6
Treasury stock, at cost, 3.2 and 2.7 shares, respectively	(45.3)		(37.1)
Accumulated other comprehensive (loss) income	(0.7)		(0.4)
Total SciPlay stockholders’ equity	114.7		109.2
Noncontrolling interest	540.6		506.4
Total stockholders’ equity	655.3		615.6
Total liabilities and stockholders’ equity	$	806.5	$	765.7

See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited, in millions)



	Class A common stock			Class B common stock			Additional paid-in capital		Retained earnings		Treasury stock		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total
	Shares	Amount		Shares	Amount
December 31, 2022	22.1	$	—	103.5	$	0.1	$	72.0	$	74.6	$	(37.1)	$	(0.4)	$	506.4	$	615.6
Net income	—	—		—	—		—		5.5		—		—		36.3		41.8
Stock-based compensation	—	—		—	—		1.2		—		—		—		3.0		4.2
Settlement of liability awards	—	—		—	—		0.8		—		—		—		3.6		4.4
Vesting of RSUs, net of tax withholdings and other	0.3	—		—	—		(0.2)		—		—		—		(0.7)		(0.9)
Distributions to Parent and affiliates, net	—	—		—	—		—		—		—		—		(0.1)		(0.1)
Repurchases of stock	(0.5)	—		—	—		6.8		—		(8.2)		—		(6.8)		(8.2)
Economic rebalancing(1)	—	—		—	—		(0.1)		—		—		—		0.1		—
Currency translation	—	—		—	—		—		—		—		(0.3)		(1.2)		(1.5)
March 31, 2023	21.9	$	—	103.5	$	0.1	$	80.5	$	80.1	$	(45.3)	$	(0.7)	$	540.6	$	655.3

















(1) SciPlay Parent LLC equity attributable to SciPlay Corporation and the noncontrolling interest holders is rebalanced, as needed, to reflect changes in LLC Unit ownership.

	Class A common stock			Class B common stock			Additional paid-in capital		Retained earnings		Treasury stock		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total
	Shares	Amount		Shares	Amount
December 31, 2021	24.5	$	—	103.5	$	0.1	$	45.2	$	52.2	$	—	$	1.1	$	426.4	$	525.0
Net income	—	—		—	—		—		4.4		—		—		27.6		32.0
Stock-based compensation	—	—		—	—		0.4		—		—		—		1.5		1.9
Vesting of RSUs, net of tax withholdings	0.2	—		—	—		—		—		—		—		(0.1)		(0.1)
Distributions to Parent and affiliates, net	—	—		—	—		—		—		—		—		(0.2)		(0.2)
Currency translation	—	—		—	—		—		—		—		(0.3)		(1.3)		(1.6)
March 31, 2022	24.7	$	—	103.5	$	0.1	$	45.6	$	56.6	$	—	$	0.8	$	453.9	$	557.0

















See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)



	Three Months Ended
	March 31,
	2023		2022
Net cash provided by operating activities	$	41.7	$	36.6
Cash flows from investing activities:
Capital expenditures	(3.8)		(2.0)
Acquisition of business, net of cash acquired	—		(106.2)

Net cash used in investing activities	(3.8)		(108.2)
Cash flows from financing activities:

Payments on license obligations	(1.0)		(0.4)

Purchases of treasury stock	(8.2)		—
Distributions to Light & Wonder and affiliates, net	(0.1)		(0.2)
Taxes paid related to net share settlement of equity awards and other	(0.9)		(0.1)

Net cash used in financing activities	(10.2)		(0.7)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(0.3)		(0.1)
Increase (decrease) in cash, cash equivalents and restricted cash	27.4		(72.4)
Cash, cash equivalents and restricted cash, beginning of period	330.1		364.4
Cash, cash equivalents and restricted cash, end of period	$	357.5	$	292.0


Supplemental cash flow information:
Cash paid for income taxes	$	0.4	$	0.5


Supplemental non-cash transactions:
Non-cash additions to intangible assets related to license agreements	$	7.1	$	—

See accompanying notes to condensed consolidated financial statements.

SCIPLAY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in USD, table amounts in millions, except per share amounts)

(1) Description of the Business and Summary of Significant Accounting Policies

Background and Nature of Operations

SciPlay Corporation was formed as a Nevada corporation on November 30, 2018 as a subsidiary of Light & Wonder, Inc. (“Light & Wonder”, “L&W” or “Parent”), for the purposes of completing a public offering and related transactions in order to carry on the business of SciPlay Parent LLC and its subsidiaries (collectively referred to as “SciPlay”, the “Company”, “we”, “us” and “our”). As the managing member of SciPlay Parent LLC, SciPlay operates and controls all of the business affairs of SciPlay Parent LLC and its subsidiaries.

We develop, market and operate a portfolio of games played on various mobile and web platforms, including Jackpot Party® Casino, Quick Hit® Slots, Gold Fish® Casino, Hot Shot Casino®, Bingo Showdown®, MONOPOLY® Slots, 88 Fortunes® Slots, Solitaire Pets™ Adventure and Backgammon Live as well as other games in the hyper-casual space, such as Candy Challenge 3D™, Boss Life™ and Deep Clean Inc.™. Our games are available in various formats. We have one operating segment with one business activity, developing and monetizing games.

Basis of Presentation

The accompanying financial statements are presented in conformity with accounting principles generally

SEC Form 10-Q filed by SciPlay Corporation