Light & Wonder has recommitted to its 2025 consolidated adjusted EBITDA target of $1.40 billion (£1.1 billion/€1.32 billion) after reporting its 14th consecutive quarter of revenue growth during Q3.
Posted last night (12 November), the Q3 results show revenue for the three months to 30 September hit $817 million. This is up 11.8% from last year at Light & Wonder, while at the same time consolidated revenue saw double-digit year-on-year growth for the ninth straight quarter.
Light & Wonder posted growth across its three core business segments. The Gaming division saw the most growth, with revenue rising 15.5% to $537 million on the back of a 38.4% rise in machine sales.
Consolidated adjusted EBITDA was also 11.5% higher in Q3, although there was a decline in bottom-line net profit. This came on the back of increased operating costs, which were up 12.7%.
President and CEO Matt Wilson said that ongoing revenue growth is the result of the group’s cross-platform strategy. With this, he expects growth trends to continue into Q4 and beyond, keeping Light & Wonder on track for its 2025 consolidated adjusted EBITDA target.
“Our Q3 results once again reflect the relentless collective efforts of the talent across our organisation underpinned by our robust and scalable R&D platform,” Wilson said. “We will continue to execute on our cross-platform strategy focused on innovative content and products as a leading global end-to-end gaming technology solutions provider.
Wilson won’t give away Dragon Train 2.0 secrets
Wilson said various iterations of the popular game Light & Wonder Dragon Train game are in development, although he refrained from providing any further details.
This was in response to analyst questions on the state of the game’s development, after Aristocrat secured a District Court of Nevada injunction on 23 September that required Light & Wonder to stop providing Dragon Train to clients.
At the time Aristocrat insisted the Light & Wonder game misappropriated its intellectual property, copying game mechanics and gameplay and copyright infringement.
In a video statement published last month Wilson confirmed Light & Wonder is developing a new version of the game – Dragon Train 2.0 – the launch date of which is yet to be confirmed.
During the Q3 earnings call, Wilson downplayed the impact of the case, saying Light & Wonder’s portfolio is much more than just one game series.
“Dragon Train, the original, was clearly a game that players wanted to play and customers wanted to buy and that’s what we’re about building,” he said. “What was contested in Dragon Train was a very narrow part of the game.
“We’re actively working on building a number of different variations of Dragon Train for the portfolio. We won’t tip our hand exactly to when we’re going to launch those games here publicly. We know many of our competitors dial into these calls. So, we’ll keep our cards close to our chest on that.”
Machine sales drive gaming growth in Q3
Breaking down Q3, Light & Wonder said revenue for its social gaming SciPlay arm was up 5.1% and hit $206 million, a lift from $196 million last year. Light & Wonder put this down to high player engagement and monetisation. Revenue from in-app mobile purchases were 6.4% lower than the previous year but web-based purchases revenue almost doubled year-on-year.
Finally, igaming revenue, up 5.7%, topped $74 million for Q3. Light & Wonder said that this reflected continued momentum in North America and Europe, as well as new content launches. As for player spending, some $22.8 billion was wagered across igaming during the quarter.
Looking at overall performance, $530 million of all revenue came from services, up 5.4% on last year. The remaining $287 million was generated from products activity, a rise of 25.9%.
Spending money to make money
In terms of costs, operating expenses were up to $658 million, with spending higher across almost all areas. Only cost of services declined, although this was only a marginal fall year-on-year.
Such was the impact of revenue growth that operating profit increased 8.2% to $159 million. However, after including $78 million in other expenses, pre-tax profit slipped 13.8% to $81 million.
Light & Wonder paid $17 million in tax, meaning it ended Q3 with a net profit of $64 million, down 14.7%. There was, however, better news with consolidated adjusted EBITDA, which jumped 11.5% to $319 million.
Light & Wonder going after UEA vendor licence
Speaking on the post-earnings call, Wilson fielded several questions about longer-term growth plans at Light & Wonder. This included the potential to move into new markets and expand its presence in others. He said the supplier was in the process of securing a vendor licence in the UAE.
Wilson said both Macau and the Philippines offer “near-term” opportunities for the group, but also highlighted other regions where it hopes to grow, picking out the United Arab Emirates (UAE), Thailand and Japan in particular.
“So, the UAE is a very interesting one,” Wilson said. “Obviously, Wynn is licensed there now. We’re in the process of getting regulatory compliance.
“You’ve also got Thailand, in the process of dealing with their expansion opportunities. You have got Japan on the horizon. So, there is a really unique set of opportunities coming online in the international market. I think we’re very well positioned.
“I’d say, Macau and the Philippines more of a near-term opportunity. And then, if you think about Thailand, Japan, UAE, probably more like 2027 and beyond. It’s a meaningful catalyst on the horizon for the gaming business.”
Year-to-date net profit exceeds $220 million
As for the year-to-date, revenue in the nine months to 30 September was 12.1% higher at $2.39 billion. Services revenue climbed 6;6% to $1.57 billion and products revenue 24.9% to $818 million.
Operating costs increased 6.9% to $1.89 billion but revenue growth allowed operating profit to rise 38.1% to $500 million. Even after including $211 million in other expenses, pre-tax profit was 107.9% higher at $289 million.
After $61 million in tax payments, bottom-line net profit at Light & Wonder hit $228 million, up 137.5%. In addition, consolidated adjusted EBITDA grew 13.6% to $926 million.
