GGRAsia – L&W reports lower 3Q profit, revenue up 12pct y-o-y

L&W reports lower 3Q profit, revenue up 12pct y-o-y

Nov 13, 2024 Newsdesk Latest News, Top of the deck, World

Casino equipment and online games provider Light & Wonder Inc (L&W) reported third-quarter revenue of US$817 million, flat sequentially, and up 11.8 percent on a year earlier, according to a Tuesday announcement.

The firm said its net income attributable to shareholders fell 14.7 percent year-on-year, to US$64 million. Judged sequentially, such net income was down 22.0 percent.

The company said the year-on-year decline in net income was “primarily due to higher restructuring and other costs related to certain legal matters, offset by higher revenue and healthy margins”.

Light & Wonder’s consolidated adjusted earnings before interest, taxation, depreciation, and amortisation (EBITDA) were up 11.5 percent from a year earlier, at US$319 million, but down 3.3 percent quarter-on-quarter.

The group has three main segments: land-based gaming; the digital games unit SciPlay; and iGaming.

Matt Wilson, president and chief executive of Light & Wonder, was cited as saying of the third-quarter performance: “Our results once again reflect the relentless collective efforts of the talent across our organisation underpinned by our robust and scalable research and development platform.”

The company said the three months to September 30 represented the “ninth consecutive quarter of double-digit consolidated revenue growth year-over-year”.

The increase in group-wide revenue was “driven by strong performance across all our businesses,” it added.

Aggregate revenue in the gaming segment for the July to September period rose by 15.5 percent year-on-year, to US$537 million. Such increase was “primarily driven by global gaming machine sales growth, which increased 38 percent, coupled with strong performance in North American gaming operations,” stated Light & Wonder.

The company shipped 13,063 new gaming machine units in the three months to September 30, up 50.4 percent from a year earlier.

Third-quarter 2024 shipments included 6,969 units sold in the international market, including Asia Pacific, compared with 4,045 units a year earlier. Gaming segment adjusted EBITDA were up 13.6 percent year-on-year, to US$267 million.

SciPlay generated US$206 million in third-quarter revenue, up 5.1 percent year-on-year. Light & Wonder’s iGaming segment recorded revenue of US$74 million, a 5.7-percent increase year-on-year.

Free cash flow for the gaming technology group was US$83 million in the third quarter, compared to US$123 million in the prior-year period. “The decrease was primarily due to changes in working capital,” noted the firm.

The face value of the group’s long-term debt outstanding as of September 30 was US$3.91 billion, “including US$2.2 billion of variable rate obligations,” said the results filing.

Litigation, 2025 targets

Light & Wonder’s chief financial officer, Oliver Chow, said in prepared remarks: “The highly cash generative nature of our business, combined with a healthy balance sheet and strategic capital allocation programme, has proven to be a strong framework to create shareholder value.”

He added the firm maintained its strong conviction in “our strategy and roadmap as we reaffirm our 2025 US$1.4 billion consolidated adjusted EBITDA target and look to remain a compounder of growth for years to come.”

In Tuesday’s announcement, Light & Wonder also mentioned the ongoing “Dragon Train” litigation with rival firm Aristocrat Technologies Inc.

Light & Wonder has flagged a “number of key initiatives to mitigate the immediate impact and any continuing business disruption” from a preliminary injunction order by a court in the United States, relating to future sales and distribution of the Dragon Train title.

“Our North American gaming operations installed base consisted of approximately 2,200 units of Dragon Train-themed games, of which, to date, approximately 95 percent have been successfully replaced and / or converted with another game from our portfolio of game franchises,” stated Light & Wonder in Tuesday’s update.

The company said its “pre-ruling estimate” of 2025 consolidated adjusted EBITDA for Dragon Train “was less than 5 percent of the US$1.4 billion target”.

“We expect growth in consolidated adjusted EBITDA to be above 10 percent for the full year 2024. We will continue to execute on our long-term sustainable growth strategy progressing towards our 2025 financial targets,” it added.

JP Morgan wrote in a Wednesday memo: “Although third quarter was a slight miss, Light & Wonder has given confidence in the next quarter’s growth and the outlook for 2025, which was a key concern given the movements and conversions for Dragon Train.”

“Fiscal-year 2024 EBITDA guidance, above 10 percent growth, provides greater confidence on the near-term earnings trajectory,” wrote analysts Don Carducci and Michael James.

The fact that Light & Wonder is providing a target of adjusted net profit after tax (NPATA) in the range of between US$565 million and US$635 million for fiscal year 2025, “implies circa 2 percent upside to consensus NPATA estimates at the mid-point,” they added.