Tariff Pressures and Legal Risks Shadow Light & Wonder’s Growth Trajectory

Solid Start to 2025 Amid Strategic Moves

Light & Wonder, Inc. (LNW) delivered a steady first quarter in 2025, marking its 16th consecutive quarter of year-over-year revenue growth. The company reported a 2% increase in consolidated revenue to $774 million, alongside expanded adjusted EBITDA margins across its three core segments: Gaming, SciPlay, and iGaming. This performance was underpinned by strong cash flow generation and a disciplined approach to capital allocation, including a significant share repurchase program.

Gaming Segment Drives Growth

The Gaming segment led the revenue expansion with a 4% increase to $495 million. Growth was broad-based, with notable strength in Gaming operations, which benefited from an increased installed base in the U.S. and Canada and elevated average daily revenue per unit. Table products surged 9%, while gaming systems grew 5%, reflecting the success of popular franchises such as HUFF N’ PUFF, ULTIMATE FIRE LINK, and FRANKENSTEIN. Despite some headwinds from international unit reductions, the segment’s margin improvements highlight effective operational efficiencies and a favorable revenue mix.

SciPlay Navigates Payer Dynamics

SciPlay’s revenue declined slightly by 2% to $202 million, primarily due to a decrease in average monthly payers, particularly in the flagship Jackpot Party® Casino. However, this was partially offset by a 3% increase in average monthly revenue per paying user, signaling improved monetization strategies. The segment’s adjusted EBITDA margin expanded to 32%, supported by growth in revenue from its proprietary direct-to-consumer platform, which now accounts for approximately 13% of SciPlay’s revenue. The company is closely monitoring geopolitical risks, particularly in Israel, where a significant portion of SciPlay’s personnel is based.

iGaming Momentum and Operational Focus

iGaming revenue rose 4% to $77 million, driven by continued momentum in North America and an expanding partner network. The segment’s adjusted EBITDA margin improved to 35%, despite incurring $7 million in restructuring costs related to the discontinuation of Live Casino operations. This strategic move reflects management’s intent to reallocate resources toward higher-return investments within the digital gaming space.

Capital Structure and Acquisition Strategy

In February 2025, Light & Wonder amended its LNWI Credit Agreement, increasing revolving credit commitments from $750 million to $1 billion, extending maturity, and reducing borrowing margins by up to 50 basis points. This enhanced liquidity position supports the pending acquisition of Grover Charitable Gaming for $850 million upfront, with up to $200 million in contingent payments over four years. Grover is a leading provider of electronic pull-tabs across five U.S. states, and the acquisition is expected to close in Q2 2025, subject to regulatory approvals. Financing will be sourced from existing cash, incremental debt, and the expanded revolver.

Shareholder Returns and Legal Landscape

The company repurchased approximately 1.9 million shares at a cost of $167 million during the quarter, reflecting confidence in its cash flow generation and capital allocation strategy. On the legal front, Light & Wonder continues to manage multiple ongoing litigations, including intellectual property disputes and regulatory challenges, with potential financial impacts yet to be fully determined. Management remains vigilant in assessing these risks while focusing on operational execution.

Navigating Economic and Geopolitical Risks

Management highlighted concerns over inflationary pressures, trade tariffs, particularly those affecting supply chains sourcing from Asia, and geopolitical uncertainties, including the conflict in Israel. The company has implemented mitigation strategies such as supplier diversification and operational efficiencies to offset cost pressures. However, the full impact of these external factors remains uncertain and will require ongoing attention.