Light & Wonder, Inc. (LNW) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Consolidated Revenue Increased 3% year-over-year to $841 million. This growth was attributed to strong execution on the product road map and game performance.
Consolidated AEBITDA Grew 18% year-over-year to $375 million, supported by record margin expansion across all three businesses.
Adjusted NPATA Grew 25% year-over-year, with adjusted NPATA per share (EPSA) increasing 35% year-over-year to $1.81. This was driven by revenue growth and operational efficiencies.
Recurring Revenue Grew 14% year-over-year, accounting for approximately 69% of consolidated revenue. This growth was driven by the high flow-through business model and investments in the product road map.
Gaming Operations Revenue Increased 38% year-over-year to $241 million, driven by North American units installed and $40 million from Grover contributions.
iGaming Revenue Achieved record revenue of $86 million, up 16% year-over-year, driven by strong momentum in North America and first-party content proliferation.
iGaming AEBITDA Increased 42% year-over-year to $34 million, with margins up 800 basis points due to first-party content growth and strategic resource realignment.
Free Cash Flow Increased 64% year-over-year to $136 million, driven by earnings growth and lower cash tax payments.
Net Income Increased 78% year-over-year, driven by revenue growth and operational efficiencies.
Average Monthly Revenue Per Paying User (SciPlay) Increased 11% year-over-year to over $126, reflecting strong monetization efforts.
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Operating Highlights
Grover Charitable Gaming Integration: Generated over $40 million in revenue and added 229 incremental units sequentially. Since acquisition, over 830 units were added, bringing the install base to over 11,250 units. New headquarters in Raleigh, North Carolina, soft opened in October 2025.
Gaming Operations: Delivered meaningful sequential installed base growth of over 850 units, including Grover. Recurring revenue grew 14% year-over-year, accounting for 69% of consolidated revenue.
iGaming: Achieved record revenue of $86 million, up 16% year-over-year, driven by first-party content and growth in partner network. EBITDA increased 42% year-over-year.
Market Expansion: Entered Nebraska skill game market and commenced trials in Eastern European dynamic multi-game market. Received approval to go live in the Philippines as the first licensed iGaming supplier.
Charitable Gaming Expansion: Launched in Indiana as the sixth operational state, with a dedicated local team.
Revenue Growth: Consolidated revenue increased 3% year-over-year to $841 million. Adjusted NPATA grew 25% year-over-year, and EPSA increased 35% to $1.81.
Margin Expansion: Achieved record margin expansion across all three businesses, with consolidated AEBITDA growing 18% year-over-year to $375 million.
Cash Flow: Generated $184 million in operating cash flow and $136 million in free cash flow, a 64% year-over-year increase.
ASX Listing Transition: Transitioning to a sole standard listing on the ASX, effective November 14, 2025, to enhance shareholder value and profile in the gaming industry.
Capital Allocation: Returned $111 million to shareholders through share repurchases in Q3 2025. Total of $1.5 billion returned to shareholders since March 2022.
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Risk or Challenges
Gaming Machine Sales: Decline in gaming machine sales in international markets due to the large Entain order of 3,600 units in the prior year and out-of-cycle hardware churn in Australia.
Tariff Impact: Estimated mid- to high single-digit million dollar range of quarterly tariff impact starting in the fourth quarter and into 2026.
Interest Expense: Increased interest expense due to higher outstanding debt associated with the Grover acquisition and share buybacks.
Jackpot Party Game Performance: Revenue decline attributed to decreased number of average monthly payers at Jackpot Party, with stabilization efforts ongoing.
Regulatory Environment: Challenges in unregulated suites-based gaming impacting Jackpot Party, with efforts to adapt to regulatory changes.
International Expansion: Timing shifts in Asia demand and challenges in entering new markets like Nebraska and Eastern Europe.
Live Casino Business: Discontinued live casino business had a $3 million AEBITDA impact in the prior year, with residual impact into the first quarter of 2026.
Capital Allocation: Pending share repurchases may temporarily increase leverage above the targeted range, with plans to return to the range quickly.
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Guidance & Outlook
Gaming Business Outlook: Momentum in North America is expected to continue with strong game and hardware releases introduced at AGA and G2E. Expansion of the Charitable Gaming business is anticipated with entry into Indiana in the coming months. A sizable order of SSBT (sports betting terminals) in the U.K. and increased demand in Asia are expected in the fourth quarter.
Gaming AEBITDA Margin: Expected to trend in the low 50% range based on product mix and estimated mid- to high single-digit million dollar range of quarterly tariff impact starting in the fourth quarter and into 2026.
SciPlay Direct-to-Consumer Platform: Targeting 30% of SciPlay's revenue from the direct-to-consumer platform by 2028, up from 20% currently. User acquisition spend is expected to ramp up in 2026.
iGaming Expansion: Continued growth in North America with first-party content proliferation and international expansion opportunities, including approval to go live in the Philippines as the first licensed iGaming supplier. New franchise extensions are slated for launch in the fourth quarter.
Capital Allocation and Share Repurchase: The company plans to utilize a meaningful share of the remaining $735 million buyback capacity by the end of 2025, with leverage potentially moving slightly above the high end of the range in the near term but expected to return within the targeted range quickly.
Revenue and Profitability Targets: Confident in achieving full-year 2025 targeted consolidated AEBITDA and adjusted NPATA range, accounting for the Grover acquisition.
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Shareholder Return Plan
Share Repurchase: This quarter, we returned $111 million of capital to our shareholders through share repurchases. We are remaining nimble in the face of any near-term opportunities as we transition to a sole standard listing on the ASX, scheduled to take effect on November 14 in Australia. Subsequent to the end of the third quarter, we repurchased an additional $101 million of shares with residual buyback capacity of $735 million remaining on our existing authorized program as of October 31, 2025. The company completed $765 million of its total authorized $1.5 billion share repurchase program as of the end of the third quarter and since the initiation of the prior share repurchase program in March of 2022 through October 31, 2025. Overall, the company has returned $1.5 billion to shareholders through the repurchase of approximately 19.9 million shares, representing approximately 21% of the total outstanding shares prior to the commencement of the programs. We retain discretion to accelerate repurchase activity to capitalize on opportunities to deliver enduring value creation for shareholders and currently expect to utilize a meaningful share of the remaining available capacity prior to the end of 2025, while preserving a healthy liquidity position.
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Key Q&A
Q:How is the fourth quarter shaping up to hit the 2025 guidance?
A:The management expects a strong fourth quarter with line of sight to the 25% target range. They highlighted strong recurring revenue businesses, North American outright sales performance, and Canadian VLT orders shifting into the second half as key drivers. International game sales are slightly impacted by timing issues in Asia, but they maintain their share in the region. They also expect continued scaling from a DTC perspective in SciPlay and are working through tariff impacts.
Q:Can you provide an update on Grover and its integration with Light & Wonder?
A:Grover added 229 games in the quarter, contributing $40 million. The integration with Light & Wonder is progressing well, with Light & Wonder games expected to appear on Grover's installed base by early 2026. The Indiana market entry has shifted to the first quarter due to regulatory delays, but the market remains promising. They have opened a head office in Raleigh, North Carolina, and an integration center in Indiana.
Q:What drove the Q3 gaming margin improvement?
A:The gaming margin improvement was driven by strong gaming operations, with 639 games added in the period and 2,800 year-on-year. Recurring revenue businesses scaled well, and RPDs grew 5% year-over-year. Product mix and tariff impacts will normalize margins moving forward.
Q:What is the current demand environment and customer budget planning for next year?
A:The market is resilient, with high reinvestment levels from customers. Replacement cycles are ticking up, and the percentage of premium games on floors has increased to 15%-16%. Customers are considering accelerated depreciation tax incentives for budget planning. Light & Wonder continues to focus on building great games and gaining market share.
Q:What is the outlook for iGaming and SciPlay?
A:iGaming grew 18% in revenue and 42% in AEBITDA, driven by strong content like Huff N' Puff and Pirots 4. SciPlay faced challenges with mature games like Jackpot Party and Gold Fish but expects stabilization and growth in 2026. Direct-to-consumer revenue mix has increased from 12% to 20%, with a target of 30% by 2028.
Q:What are the expectations for gaming EBITDA margins and tariff impacts?
A:Gaming EBITDA margins are expected to normalize around 50% due to product mix and recurring revenue scaling. Tariff impacts are estimated at mid- to high single-digit millions, with mitigation efforts including pricing adjustments and cost optimization.
Q:What is the international business outlook for Q4 and next year?
A:The EMEA region faces some noise due to prior large orders, but SSBT orders in Q4 will help. ANZ is cycling over a tough period but expects growth in 2026 with new content and hardware. Asia is impacted by timing issues, with some projects pushed to 2026, but market share remains stable.
Q:How does the Carbon platform improve game delivery?
A:The Carbon platform allows for building games once and deploying them across multiple channels, including Grover. It incorporates best-in-class AI tools to accelerate game development and delivery. The platform is expected to enhance efficiency and game quality over time.
Q:What are the sustainable margin levels in iGaming?
A:iGaming margins are expected to sustain above 40%, supported by structural and operational improvements, including the exit from the live dealer business and a focus on high-margin 1PP content.
Q:What are the plans to mitigate tariff costs?
A:Mitigation plans include pricing adjustments, optimizing hardware and content strategies, and working with partners to ensure optimal outcomes. The company is leveraging its expertise in margin enhancement to address these challenges.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific timing and details of certain initiatives, such as the exact timeline for stabilizing Jackpot Party and Gold Fish in SciPlay. Additionally, while they mentioned mitigation efforts for tariff impacts, they did not provide detailed strategies or timelines for these measures.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AEBITDA
ASX
America unit
Chief Corporate
Corporate Affairs
Executive
Fire Link
GE
Global Chief
Huff Puff
Indiana
Jackpot Party
Light Wonder
RD engine
Riches
Ultimate Fire
contribution
decline
entry
feature
flywheel
franchise extension
highlight Slide
omnichannel
platform industry
portfolio game
profile
profitability
result highlight
road map
softness
studio game
support
track
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
Frequently Asked Questions
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