Business Overview and History

Light & Wonder, Inc. (LNW) is a leading cross-platform global games company with a focus on content and digital markets. The company's diversified portfolio of revenue-generating activities primarily includes supplying game content and gaming machines, casino management systems (CMS), and table game products and services to licensed gaming entities, as well as providing social casino and other online games to retail customers and a comprehensive suite of digital gaming content, distribution platforms, player account management systems, and various other iGaming content and services.

Light & Wonder, formerly known as Scientific Games Corporation, was founded in 1973 as a manufacturer of instant lottery tickets. Over the years, the company evolved into a leading global provider of technology-based products, services, and content for the gaming and lottery industries. The company has a rich history of growth through strategic acquisitions, including the acquisitions of WMS Industries in 2013, Bally Technologies in 2014, and NYX Gaming Group in 2017. These acquisitions have strengthened Light & Wonder's product portfolio, technological capabilities, and global reach.

Throughout its history, Light & Wonder has faced various challenges. In the early 2000s, the company encountered financial difficulties and had to restructure its debt. More recently, in 2020, the COVID-19 pandemic significantly impacted the gaming industry, leading to temporary casino closures and reduced consumer spending. Light & Wonder worked to adapt its operations and offerings to the changing market conditions.

Despite these challenges, Light & Wonder has remained a leader in the gaming and lottery industries. The company has continuously invested in research and development to innovate its products and services, allowing it to maintain a competitive edge. Light & Wonder's diversified business model, which spans gaming machines, systems, table products, social gaming, and iGaming, has also been a key factor in its resilience and success over the years.

In 2022, the company completed the divestitures of its former Lottery Business and Sports Betting Business, marking a major milestone in transforming its business and deleveraging its balance sheet. This strategic move has allowed Light & Wonder to focus on its core gaming, social casino, and iGaming operations, driving sustainable growth and delivering value to shareholders.

Financial Performance and Metrics

Light & Wonder has demonstrated impressive financial performance, with the company reporting record consolidated revenue of $3.19 billion for the full year 2024, a 10% increase over the prior year. This growth was driven by strong performances across all three of the company's business segments: Gaming, SciPlay, and iGaming.

The company's Gaming segment revenue grew 12% year-over-year to $2.07 billion, with the North American gaming machine sales business leading the charge with a 16% increase in unit shipments globally. The SciPlay segment also delivered a solid performance, with revenue growing 6% to $821 million, underpinned by the strength of the company's social casino game portfolio. Meanwhile, the iGaming segment reported a 9% revenue increase to $299 million, driven by continued momentum in North America and Europe, as well as successful content launches.

Light & Wonder's profitability has also been impressive, with the company reporting consolidated AEBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization) of $1.24 billion for the full year 2024, an 11% increase year-over-year. This strong profitability, coupled with the company's focus on capital allocation and balance sheet management, has enabled Light & Wonder to return significant capital to shareholders, with $462 million in share repurchases completed during 2024.

For the most recent quarter (Q4 2024), Light & Wonder reported revenue of $797 million, representing a 4% year-over-year growth. Net income for the quarter stood at $107 million, with quarterly operating cash flow of $202 million and quarterly free cash flow of $74 million.

The company's full-year 2024 performance was equally strong, with annual net income reaching $336 million, annual operating cash flow of $632 million, and annual free cash flow of $338 million. Light & Wonder's full-year operating income was $668 million, marking a 29% increase year-over-year.

Strategic Initiatives and Growth Drivers

Looking ahead, Light & Wonder is well-positioned to continue its growth trajectory, driven by several key strategic initiatives and growth drivers:

1. Expansion into Charitable Gaming: In February 2025, Light & Wonder announced the acquisition of Grover Gaming's charitable gaming assets for $850 million, plus up to $200 million in potential earn-out payments. This strategic move will expand the company's presence in the high-growth charitable gaming market, leveraging Grover's strong customer relationships and providing a compelling opportunity to cross-pollinate content and technologies across the combined platform. The acquisition is expected to be high single-digit accretive to Adjusted NPATA in the first full calendar year of ownership in 2026.

2. Omnichannel Content Deployment: The company's focus on developing engaging content and optimizing its distribution across land-based, digital, and social platforms has been a key driver of its success. Through the integration of its R&D efforts and the appointment of Nathan Drane as Chief Product Officer, Light & Wonder is poised to further enhance its cross-platform content strategy, driving synergies and efficient deployment of its proven game franchises.

3. Geographical Expansion: Light & Wonder continues to expand its global footprint, with recent successes in markets like Australia, where the company maintained its number one ship share position in 2024. The company is also well-positioned to capitalize on the anticipated growth in emerging markets, such as Brazil, where iGaming was recently legalized. Approximately 35% of Light & Wonder's revenue is derived from sales to customers outside of the U.S., with significant presence in international markets such as the UK, Europe, and Australia.

4. Operational Excellence and Cost Optimization: The company's focus on operational excellence and cost optimization initiatives has enabled it to maintain strong margins and profitability. Light & Wonder's culture of accountability and proactive process improvements have contributed to its ability to navigate dynamic market conditions and retain flexibility to drive positive outcomes.

Risks and Challenges

While Light & Wonder has demonstrated impressive performance, the company faces several risks and challenges that investors should be aware of:

1. Regulatory Landscape: As a heavily regulated industry, the gaming sector is subject to evolving laws and regulations across various jurisdictions. Light & Wonder's ability to obtain and maintain the necessary licenses and approvals, as well as navigate potential changes in the regulatory environment, will be critical to its continued success.

2. Competition and Technological Advancements: The gaming industry is highly competitive, with the company facing constant pressure to innovate and adapt to changing consumer preferences and technological advancements. Failure to keep pace with industry trends could impact Light & Wonder's market share and profitability.

3. Macroeconomic Conditions: The gaming industry is susceptible to changes in consumer discretionary spending and broader economic conditions. Unfavorable macroeconomic factors, such as rising inflation, interest rates, or geopolitical tensions, could adversely affect the company's financial performance.

4. Integration and Execution Risks: The successful integration of acquired businesses, such as Grover Gaming, and the effective execution of strategic initiatives will be crucial to Light & Wonder's ability to realize the expected synergies and drive long-term growth.

Financials

Light & Wonder's financial performance has been strong, as evidenced by its record consolidated revenue of $3.19 billion for the full year 2024. The company's Gaming segment, which contributed $2.07 billion in revenue, showed a 12% year-over-year growth. The SciPlay segment generated $821 million in revenue, representing a 6% increase, while the iGaming segment reported $299 million in revenue, a 9% increase from the previous year.

The company's profitability metrics are equally impressive, with consolidated AEBITDA reaching $1.24 billion for the full year 2024, an 11% increase year-over-year. Light & Wonder's full-year Adjusted NPATA totaled $480 million, representing a 24% growth rate. This strong financial performance has allowed Light & Wonder to maintain a robust capital allocation strategy, including significant share repurchases totaling $462 million in 2024.

Looking at the company's performance by business segment:

Gaming Segment: This is the largest contributor to Light & Wonder's revenue, generating $2.07 billion in 2024, up 12% from the prior year. The segment's AEBITDA increased 12% to $1.03 billion, with the AEBITDA margin holding steady at 50%. The installed base of gaming machines in the U.S./Canada grew 9% year-over-year, while the international installed base declined 10%. Average daily revenue per unit increased 2% and 4% in these regions, respectively. Unit shipments increased 21% in the U.S./Canada and 12% internationally.

SciPlay Segment: SciPlay revenue grew 6% to $821 million in 2024, driven by an 11% increase in average revenue per daily active user (ARPDAU) to $1.04, partially offset by a 3% decline in average monthly paying users. SciPlay's AEBITDA increased 12% to $272 million, with the AEBITDA margin expanding 2 percentage points to 33%.

iGaming Segment: iGaming revenue grew 9% to $299 million in 2024, driven by expansion in North America and Europe. iGaming AEBITDA increased 3% to $98 million, while the AEBITDA margin declined slightly to 33% due to the impact of certain license termination fees in the prior year.

Liquidity

Light & Wonder's liquidity position remains strong, supported by its robust cash flow generation and strategic divestitures. The company's focus on deleveraging its balance sheet through the sale of its Lottery Business and Sports Betting Business has significantly improved its financial flexibility. This enhanced liquidity position enables Light & Wonder to pursue strategic growth opportunities, such as the acquisition of Grover Gaming's charitable gaming assets, while maintaining a conservative financial profile.

As of December 31, 2024, Light & Wonder had $196 million in cash and cash equivalents and $750 million in undrawn capacity under its revolving credit facility. The company's current ratio stands at 1.61, while its quick ratio is 1.39, indicating a healthy short-term liquidity position.

The company's strong cash flow generation, coupled with its disciplined approach to capital allocation, provides a solid foundation for future investments in product development, market expansion, and potential strategic acquisitions. Additionally, Light & Wonder's improved liquidity position enhances its ability to navigate potential market volatility and capitalize on emerging opportunities in the dynamic gaming industry landscape.

Future Outlook and Guidance

Light & Wonder has provided positive guidance for the future, building on its strong performance in 2024. The company expects to generate $1.4 billion in Adjusted EBITDA in 2025. For the first quarter of 2025, Light & Wonder anticipates low double-digit year-over-year consolidated Adjusted EBITDA growth.

The acquisition of Grover Gaming's charitable gaming assets is expected to be high single-digit accretive to Adjusted NPATA in the first full calendar year of ownership in 2026, further enhancing the company's growth prospects.

Light & Wonder's focus on operational excellence, coupled with its strategic initiatives and strong market position across its business segments, positions the company well for continued growth and value creation in the coming years.

Conclusion

Light & Wonder has demonstrated its ability to navigate a dynamic industry landscape and deliver sustainable growth through its diversified portfolio of gaming, social casino, and iGaming offerings. The company's strategic initiatives, including the acquisition of Grover Gaming's charitable gaming assets and its focus on omnichannel content deployment, position it well for continued success. While the company faces some risks, its strong financial performance, operational excellence, and experienced management team suggest that Light & Wonder is well-equipped to capitalize on the growth opportunities in the global gaming market.

The gaming industry's continuous development of new technologies, products, and game content, along with the growth of gaming in land-based venues and the expansion of digital gaming, provide a favorable backdrop for Light & Wonder's future growth. With its strong market position, innovative product offerings, and strategic focus on high-growth areas, Light & Wonder is poised to maintain its leadership in the global gaming industry and deliver long-term value to its shareholders.