Q2 is Light & Wonder’s 13th straight quarter of year-on-year consolidated revenue growth with the total hitting $818m (£644.1m/€747.8m) over the three months to 30 June. It’s also the eighth quarter in a row of double-digit growth.
Light & Wonder’s increasing revenue in Q2 was in large part down to its gaming division, which again was its biggest source of revenue by far. It generated $539m in Q2 revenue, a 14.4% increase from the $471m accumulated in the same quarter last year.
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Online and SciPlay performance
M&A prospects for Light & Wonder
Strong momentum in core gaming division
That gaming success has been particularly prevalent in North America, where its installed base saw growth of 7% to 32,566 units across the region with an average daily revenue per unit of $50.41.
Adjusted EBITDA for gaming was $272m, up 16.7% from the $233m generated in Q2 of 2023.
“In gaming, we continue to see strong momentum and solid execution on our commercial strategy, Light & Wonder president and CEO Matt Wilson said on the post-Q2 earnings call. “Our performance reflects the power of the portfolio, where franchise success can be replicated and leveraged across markets and business models.
“To put this in perspective, our North American premium installed base has grown for 16 consecutive quarters and now is at approximately 50% of our total North American installed base.”
iGaming and SciPlay perform strongly
Additionally, its igaming and SciPlay social gaming businesses reported revenue increases of 5.7% and 7.9% respectively. The igaming segment generated revenue of $74m, which it attributed to continuing North American momentum, while SciPlay, which was acquired outright in October last year, brought in $205m.
Its operating activities as a whole continue to be a big factor in Light & Wonder’s growth trajectory. Net cash from operating activities during Q2 came to $141m, a huge rise from $34m seen in the same quarter of 2023, though it stated that previous period was affected by a $39m hit stemming from costs related to the strategic review that resulted in the OpenBet and Scientific Games divestments.
Consolidated AEBITDA across the company reached $330m in Q2, a 17.4% increase. Net income, meanwhile, rocketed to $82m from $5m over the same period last year, with Light & Wonder crediting its higher revenue and strong margins.
For Wilson, the company is capitalising on its product offering with the “best yet to come”.
“We continue to develop our catalog of proven, evergreen franchises to bring the most engaging experiences to our players, leveraging the power of our portfolio across land-based, social and igaming platforms,” Wilson said in the press release announcing the results.
“The uplift that we have continued to see across the business is a testament to the quality of the talent and culture in our organisation.”
Light & Wonder future bright after strong H1
While revenue growth fell short of the 12.8% seen in Q1, Light & Wonder still finished H1 with record figures.
Consolidated revenue for the first half of the year was $1.6bn, the company’s highest H1 total yet and up 14.3% on the $1.4bn generated in H1 2023.
Gaming machine sales reached $433m from $331m over the same period last year, an increase of 30.8% and one that offset a $4m drop in table products to $101m.
Net income was $164m, again a significant rise on the $32m seen in H1 2023, while consolidated AEBITDA also jumped from $529m to $610m.
CFO: Share buyback shows confidence in Light & Wonder prospects
A key highlight of the first half of Light & Wonder’s 2024 came in June. The company announced it was launching a new, three-year share repurchase programme totalling up to $1bn in outstanding common stock.
The programme will last until June 2027 and follows the company’s completion of its previous $750m share repurchase authorisation, which was due to expire in February 2025.
This highlights Light & Wonder’s confidence in its future prospects, according to chief financial officer Oliver Chow.
“We believe we will continue to create significant value for our shareholders through enhanced cash flow generation initiatives while delivering on our financial targets,” Chow stated.
Can Light & Wonder hit 2025 targets?
In May 2022, Light & Wonder set out plans to reach a consolidated AEBITDA of $1.4bn in 2025 at a compound annual growth rate of 15%.
However, the slow pace of igaming legalisation in the US has cast doubt over those figures. igaming is currently only legal in seven US states.
When asked about the $1.4bn EBITDA guidance on the earnings call, Wilson said Light & Wonder may yet “reframe” that total, though he also claimed the business sees a “great runway” to get to that total and beyond.
On the 15% CAGR required, Wilson noted the company’s 22.5% EBITDA growth in 2023 and its 17.4% rise in Q2. Wilson claimed that means Light & Wonder now needs to meet just an 11% growth rate to meet its 2025 guidance.
Will pace of US igaming pick up?
Wilson believes igaming legalisation in the US will accelerate beyond 2025, leading to an exciting future for Light & Wonder where its igaming investment will “ultimately bear fruit”.
“We’ve seen a bit of a stalling in legalisation,” Wilson explained. “The good news is, we still believe that that is going to happen. It will likely happen on the other side of 2025.
“So that kind of hyper-growth optionality that igaming presents us is great growth opportunity for us in the years beyond 2025.”
M&A not in Light & Wonder’s near-term future?
It’s been a busy period for M&A in the gambling sector.
International Game Technology (IGT) for example is set to move forward as a lottery-only business after Apollo Global Management announced a $6.3bn deal to acquire both IGT and Everi. Light & Wonder hasn’t been quite so busy, though it did announce a strategic investment into no-code automation platform Flows in February.
Light & Wonder won’t rush into M&A, though Chow believes the activity of others will ultimately prove beneficial for the industry.
“With regards to M&A, we will continue to take a disciplined approach to the extent that these opportunities are accretive and exceed our return thresholds,” Chow declared.
“Interestingly, they’ve all been taken private, which I think is driven by the fact that those private equity companies are looking for businesses that are resilient, stable and cash-generative. And clearly, that’s what they see in the sector. So I think it’s a good halo effect for the supply side of the industry.”
Is the UAE a target market?
In terms of the future, Wilson and Chow were asked on the earnings call about new markets.
Wilson pointed to Asia as an interesting region, particularly the United Arab Emirates where in July the General Commercial Gaming Regulatory Authority (GCGRA) chose The Game LLC to operate the first national lottery.
With igaming regulation in the works alongside integrated resorts, it could provide another big market for Light & Wonder. “The Asian market is something that’s really close to my heart,” Wilson said. “You see the UAE emerging as a potential market.
“I think that’s the best way to think about Asia is the traditional markets today, Singapore, Macau, Philippines, and then, yes, a broader set of opportunities over the coming years across the UAE, Japan.”
Original article: https://igamingbusiness.com/finance/light-and-wonder-q2/
