Light & Wonder, Inc. (LNW) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a positive outlook: strong financial metrics, strategic growth initiatives, and a robust shareholder return plan. The Q&A section reveals favorable litigation updates and promising integration with Grover Gaming. The increased share buyback program and positive guidance adjustments further enhance sentiment. Despite minor concerns like revised NPATA guidance, the overall tone is optimistic, suggesting a positive stock price movement in the short term.
Key Financial Performance
Revenue $809 million, inclusive of a partial quarter's contribution from Grover and record revenue at iGaming, offset by modest declines at Gaming and SciPlay.
Net Income Increased 16% to $95 million, driven by lower cost of revenue and operating expenses as well as lower restructuring and other costs.
Diluted EPS $1.11 for the quarter, an increase of 23% from the prior year period.
Consolidated AEBITDA $352 million, an increase of 7% against the second quarter of 2024, with a margin reaching 44%, a 400 basis point increase compared to the prior year period.
Adjusted NPATA $135 million, up 4% year-over-year, primarily benefiting from the contributions from Grover and expanded margins.
Operating Cash Flow $106 million, primarily impacted by $73 million related to a legal settlement payment. Absent this settlement, free cash flow saw a considerable year-over-year increase to over $100 million.
Gaming Revenue $528 million, with partial contributions of $21 million from Grover Charitable Gaming. AEBITDA was $280 million, an increase of 3% with a margin of 53%, an improvement of 300 basis points against the prior year.
Gaming Operations Revenue $209 million for the quarter. Excluding Grover, delivered a strong year-over-year revenue growth of 7%, driven by unit increases in North America.
Global Game Sales $191 million, primarily due to macroeconomic uncertainty impacting the timing of game sales as well as year-over-year comps in the international business.
Systems Revenue $73 million, where the decline was driven by certain new placements and elevated hardware replacement sales in the prior year.
Table Products Revenue $55 million, slightly higher compared to the prior year period on higher sales in EMEA and ANZ, offset by North America.
SciPlay Revenue $200 million, with Quick Hit Slots and 88 Fortunes delivering record quarterly revenues. AEBITDA was $74 million, a 6% increase year-over-year, representing a margin of 37%.
iGaming Revenue $81 million, a 9% increase over the prior year period on continued growth momentum in North America and the expansion of the partner network. AEBITDA increased 17% to $28 million, with a 300-basis-point improvement in AEBITDA margin year-over-year to 35%.
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Operating Highlights
Game Content and New Releases: Strong performance driven by evergreen franchises and new content releases. Added 845 units to North America installed base sequentially and over 2,700 units year-over-year. Proprietary titles like Ultimate Fire Link and Huff N' Puff excel in new lease game categories.
Charitable Gaming Expansion: Closed Grover Charitable Gaming acquisition, adding over 600 active units since February. Plans for new game launches in early 2026.
iGaming: Record revenue of $81 million, driven by proprietary content and exclusive partnerships. Huff N' Even More Puff ranked #1 in gross gaming revenue volume.
Geographic Expansion: New office and studio in Raleigh, North Carolina, and expansion into Indiana with first units expected this fall. Production capabilities expanded in Mexico to meet demand in Canada and Mexico.
ASX Listing Transition: Decision to transition to a sole ASX listing by November 2025, aiming to deliver long-term shareholder value.
Operational Efficiency: Margin optimization programs led to a 44% consolidated AEBITDA margin, a 400 basis point increase year-over-year. Expanded production capabilities in Mexico to optimize supply chain.
Recurring Revenue Growth: Growth in recurring revenue streams in systems and tables businesses. Direct-to-consumer platform in SciPlay grew to 18% of revenue.
Capital Allocation: Increased share repurchase program to $1.5 billion, with $950 million remaining. Focus on disciplined capital allocation and shareholder value creation.
Focus on Proprietary Content: Shifted focus to proprietary content in iGaming and social casino markets to drive higher margins and long-term growth.
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Risk or Challenges
Timing of Game Sales: The timing of game sales was impacted by a dynamic environment, particularly in North America and international markets. This includes delays in sales to Canada and Asia, as well as operator apprehension on slot purchases.
Macroeconomic Uncertainty: Evolving tariff policies and macroeconomic uncertainty have created a complex capital decision cycle for land-based operators, impacting game sales and revenue.
International Game Sales Decline: Global sales saw a decline, particularly in the International segment, due to a new cabinet release in Australia and timing of sales into Asia being weighted to the fourth quarter.
Sweepstakes Gaming Impact: The growth of unregulated sweepstakes gaming in certain U.S. states has negatively impacted the social casino market, leading to top-line erosion and increased marketing costs.
Legal Settlement Payment: A $73 million legal settlement payment related to the legacy tables business impacted operating cash flow for the quarter.
Competition in Social Casino Market: Increased competition from sweepstakes gaming has created challenges in the social casino market, affecting monetization and user acquisition costs.
Production and Supply Chain Adjustments: Expansion of production capabilities in Mexico is required to meet demand and timing shifts for Canadian units, indicating potential supply chain challenges.
Regulatory and Listing Transition: The transition to a sole ASX listing by November 2025 involves regulatory and operational complexities, requiring engagement with stakeholders and index providers.
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Guidance & Outlook
Charitable Gaming Expansion: Light & Wonder plans to launch new game titles in the charitable gaming market in early 2026, leveraging the Grover Charitable Gaming acquisition. The company is also expanding into Indiana, with the first units expected to be deployed in the fall of 2025.
ASX Listing Transition: The company will transition to a sole ASX listing by the end of November 2025, aiming to deliver long-term shareholder value.
Gaming Operations Growth: The company expects continued growth in North America driven by strong game performance and the expansion of its premium installed base. International game sales are anticipated to improve in Q4 2025, particularly in Asia.
Production Expansion: Light & Wonder is expanding production capabilities in Mexico to meet demand for its gaming cabinets in Canada and Mexico, with full capacity expected in the second half of 2025.
SciPlay Growth: The company plans to grow its direct-to-consumer platform, targeting higher ROI players and increasing its share of revenue over the coming years. It also expects regulatory changes in sweepstakes gaming to positively impact the social casino market.
iGaming Expansion: Light & Wonder aims to capitalize on the strong growth trajectory of iGaming in North America and expand into new international markets, including the Philippines. The company plans to launch key proprietary content in the second half of 2025.
Financial Guidance for FY 2025: The company projects consolidated AEBITDA for FY 2025 to be between $1.43 billion and $1.47 billion, with Grover contributing approximately $65 million. Adjusted NPATA is expected to range between $550 million and $575 million.
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Shareholder Return Plan
Share Repurchase Program: The $1 billion share repurchase program authorized in 2022 is now 55% complete. Approximately $100 million of shares were repurchased during this quarter, with a total of $266 million returned in the first half of the year. Since the program's commencement, $1.3 billion has been returned to shareholders. The program has been expanded to $1.5 billion, with $550 million completed to date. Approximately $950 million remains available under the program, with plans to use at least 50% of this amount to repurchase shares traded on NASDAQ before delisting. If the full $950 million is utilized by the end of 2025, leverage may temporarily exceed the target range of 2.5 to 3.5x, but the company expects to return to the target range in the near term.
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Key Q&A
Q:Can you walk us through the investor engagement process, the timing decision, and mechanisms in place to manage volatile trading related to the sole ASX listing?
A:The decision to pursue a sole ASX listing follows an extensive consultation process with investors over six months. The transition is targeted for completion by the end of November 2025, aligning with the December S&P rebalance. The company expects this move to consolidate liquidity, optimize shareholder value, and align with growth plans. The market cap is expected to increase from AUD 4.5 billion to AUD 12.2 billion, moving the company into the ASX 50 index. Additionally, the share buyback program has been increased from $1 billion to $1.5 billion, with $950 million remaining. The company plans to utilize at least 50% of this capacity before the NASDAQ delisting.
Q:Could you provide updates on the litigation at the moment?
A:Both the Nevada and Australian federal court cases are expected to go to trial in the first half of 2026. The company had favorable rulings in June, including a motion compelling Aristocrat to identify trade secrets in more detail and denying Aristocrat's motion to access the company's hold and spin math models. The litigation now focuses on two games, Dragon Train and Jewel or Dragon.
Q:Can you walk through the difference between the high and low end of the new guidance range and confirm if anything has changed to the recently issued 2028 targets?
A:The new guidance range is $1.43 billion to $1.47 billion, including $65 million from the Grover acquisition. The base business is still targeting $1.4 billion. The broader range accounts for external risks like tariffs and macroeconomic factors, as well as planned investments to achieve the 2028 target of $2 billion. Investments include costs for entering the Indiana market, scaling studios, and setting up a headquarters in North Carolina. The 2028 targets remain unchanged.
Q:Can you share details about the additional 600 units with Grover and the integration progress?
A:The 600 net adds represent organic growth in existing markets, reflecting strong performance in the pull-tab segment. Integration with Grover is progressing well, with strong cultural alignment and leadership. The Indiana market entry is expected in the fall, presenting additional growth opportunities. The first Light & Wonder content is already operating on the Grover platform, showcasing the potential of the acquisition.
Q:Can you clarify the guidance for 2025 and provide more color on international sales in the second half?
A:The guidance for 2025 includes $1.4 billion for the base business and $65 million from Grover. The company is targeting the top end of the range but may make investments that could slightly impact the $1.4 billion target. International sales in the second half will include Canada VLT, Mexico facility shipments, and growth in Asia through replacements and new openings. The company is focused on executing opportunities globally.
Q:Are there any updates on changes in economics following the Apple Epic Games legal battle and consumer behavior?
A:The ruling is favorable for the gaming industry, allowing for margin optimization and direct consumer relationships. The company is building a VIP portal to enhance player engagement and capture more value. The focus is on long-term engagement rather than increasing purchase frequency.
Q:Can you provide insights into the premium lease space in the U.S., particularly regarding Huff N' Puff?
A:The company added 845 incremental units, with Huff N' Puff Hard Hat performing well as a replacement for Dragon Train. While Huff N' Puff may atrophy over time, the company has a strong lineup of games, including Huff N' Puff Grand and MONOPOLY Express. The upcoming G2E show will showcase new innovations, including the Lightwave product.
Q:What are the near-term expectations for free cash flow conversion?
A:Normalized free cash flow for the quarter was over $100 million, reflecting a 77% conversion rate. The company expects continued growth in free cash flow, driven by increased earnings, efficient working capital management, and the cash-generative nature of the business, including contributions from Grover.
Q:Are there any discussions with operators about the updated U.S. tax structure and its impact on slot machines and equipment?
A:The updated tax structure includes provisions for domestic R&D expensing, bonus depreciation, and interest expense limitations. These changes benefit both the company and operators, providing immediate tax deductions and supporting demand for slot machines and equipment. The company expects annual cash tax savings of $40 million to $50 million.
Q:Can you explain the revised NPATA guidance and factors affecting it?
A:The revised NPATA guidance is $550 million to $575 million, down from $565 million to $635 million. Factors include modest accretion from Grover due to D&A and interest expenses, higher interest expenses from share repurchases, elevated D&A from success-based CapEx, and slight income tax headwinds. The company remains focused on long-term accretive growth.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the timing of litigation updates, offering limited details and focusing on past favorable rulings rather than the broader implications or potential outcomes of the cases.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ASX end
America base
America expansion
American market
Andre Peter
Asia North
Australia decision
Australia timing
Division Rohan
Division Ryan
Group LLC
Huff Puff
Inc Research
Investor Day
LLC Research
Limited Research
Mexico
Pty Limited
Puff game
Research Division
contribution
demand
discipline
fact
game category
game economy
game party
game value
party content
quality
road map
state
stream
studio talent
sweepstakes
website
LNW Transcript
Light & Wonder, Inc. (LNW) Q3 2025 Earnings Call Transcript
Positive11-8
The earnings report highlights strong financial performance with record iGaming revenue and significant year-over-year growth in net income and free cash flow. The Q&A section reveals positive sentiment, with management expecting a robust Q4 and maintaining guidance targets. Despite some timing issues and tariff impacts, the company is focused on strategic growth in iGaming, SciPlay, and international markets. The strong operational metrics and optimistic guidance suggest a positive stock price movement, especially given the lack of market cap data to assess volatility.
Light & Wonder, Inc. (LNW) Q2 2025 Earnings Call Transcript
Positive8-6
The earnings call summary presents a positive outlook: strong financial metrics, strategic growth initiatives, and a robust shareholder return plan. The Q&A section reveals favorable litigation updates and promising integration with Grover Gaming. The increased share buyback program and positive guidance adjustments further enhance sentiment. Despite minor concerns like revised NPATA guidance, the overall tone is optimistic, suggesting a positive stock price movement in the short term.
Light & Wonder, Inc. (NASDAQ:LNW) Q1 2025 Earnings Call Transcript
Positive5-8
The earnings call shows strong financial performance, with year-over-year increases in revenue, EBITDA, and free cash flow. The acquisition of Grover Gaming is expected to enhance growth, and management's optimistic guidance for future revenue and margin expansion is promising. The share repurchase program and positive developments in DTC growth further bolster sentiment. While there are some concerns about tariffs and international market conditions, management's strategies to mitigate these impacts are reassuring. Overall, the positive financial results and strategic initiatives suggest a likely positive stock price movement.
Light & Wonder, Inc. (LNW) Q1 2025 Earnings Call Transcript
Positive5-7
The earnings call summary reveals strong financial performance with revenue, EBITDA, and free cash flow growth. The acquisition of Grover Gaming and a robust share repurchase program are positive catalysts. The Q&A section indicates manageable challenges, with management providing optimistic guidance and strategies to mitigate risks. Despite some unclear responses, the overall sentiment is positive. The lack of market cap information prevents precise impact estimation, but based on available data, a positive stock price movement of 2% to 8% is expected over the next two weeks.
LNW Slides
LNW Report
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