Earnings call transcript: Light & Wonder Q3 2025 sees EPS beat, revenue miss

Light & Wonder Inc. (LNW) reported its third-quarter 2025 earnings, showcasing a notable earnings per share (EPS) beat but a slight revenue miss. The company reported an EPS of $1.81, surpassing the forecast of $1.39, marking a 30.22% positive surprise. However, revenue came in at $841 million, falling short of the expected $866.79 million, a 2.98% miss. Despite the mixed results, the stock showed resilience, with a slight aftermarket increase of 2.35%, closing at $75.05.

Key Takeaways

• EPS exceeded expectations by 30.22%, highlighting strong operational efficiencies.
• Revenue fell short by 2.98%, despite a 3% year-over-year increase.
• Stock price rose by 2.35% in aftermarket trading, reflecting investor confidence.
• Strong performance in recurring revenue, growing 14% year-over-year.
• Continued innovation with new product launches and market expansions.

Company Performance

Light & Wonder’s overall performance in Q3 2025 was marked by robust earnings growth, driven by increased operational efficiency and product innovation. The company’s revenue increased by 3% year-over-year, reaching $841 million, despite missing analyst expectations. The gaming market’s resilience and strong North American performance contributed significantly to this growth.

Financial Highlights

• Revenue: $841 million, a 3% increase year-over-year.
• Earnings per share: $1.81, a 35% increase year-over-year.
• Net income increased by 78% year-over-year.
• Free cash flow rose by 64% to $136 million.
• Recurring revenue accounted for 69% of total revenue, growing 14% year-over-year.

Earnings vs. Forecast

Light & Wonder reported an EPS of $1.81, significantly beating the forecast of $1.39, marking a positive surprise of 30.22%. However, the revenue of $841 million fell short of the expected $866.79 million, representing a 2.98% miss. This mixed result highlights the company’s strong cost management and operational efficiencies, despite facing challenges in meeting revenue expectations.

Market Reaction

Following the earnings release, Light & Wonder’s stock increased by 2.35% in aftermarket trading, closing at $75.05. This positive movement suggests investor confidence in the company’s future prospects, despite the revenue miss. The stock remains within its 52-week range, with a high of $113.95 and a low of $69.56, indicating room for further growth.

Outlook & Guidance

Looking ahead, Light & Wonder anticipates continued momentum in the North American gaming market and targets double-digit growth for the full year 2025. The company is preparing to enter the Indiana charitable gaming market and expects an SSBT order in the UK in Q4. However, potential tariff impacts in Q4 2026 could pose challenges.

Executive Commentary

CEO Matt Wilson emphasized the company’s long-term growth strategy, stating, "We are not going to compromise the long-term growth of this business to hit short-term goals." CFO Oliver Chow highlighted the importance of research and development, noting, "R&D, CapEx, that’s the core of our business, the foundation of our business."

Risks and Challenges

• Potential tariff impacts in Q4 2026 could affect profitability.
• Revenue growth challenges, as evidenced by the Q3 miss.
• Market saturation in key regions could limit expansion opportunities.
• Supply chain disruptions could affect product availability.
• Macroeconomic pressures may impact consumer spending in gaming.

Q&A

During the earnings call, analysts inquired about the integration of the Grover platform and entry into the Indiana market. Discussions also focused on SciPlay’s challenges with the Jackpot Party game and potential tariff mitigation strategies. Executives clarified the sustainability of iGaming margins, reassuring investors of ongoing strategic initiatives.

Full transcript - Light & Wonder Inc (LNW) Q3 2025:

Conference Operator: Thank you all for standing by for today’s conference call with Light & Wonder. Today’s call is going to be starting momentarily. Thank you all for your patience today. Welcome to the Light & Wonder 2025 third quarter earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. To register to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you change your mind, please press star followed by the number two. Should you need operator assistance at any point during the call, you can press star and the number zero. Thank you. I will now turn the call over to Aurora Gallagher, Executive Vice President, Global Chief Corporate Affairs. Please go ahead.

Aurora Gallagher, Executive Vice President, Global Chief Corporate Affairs, Light & Wonder: Thank you, Operator, and welcome everyone to our third quarter 2025 earnings conference call. Joining me today in Sydney are Matt Wilson, our President and CEO, and Oliver Chow, our CFO. During today’s call, we will discuss our third quarter results and operating performance, where we will refer to our earnings presentation. This will then be followed by a question-and-answer session. Today’s call will contain forward-looking statements that may involve certain risks and uncertainties that could cause actual results to differ materially from those discussed during the call. For information regarding these risks and uncertainties, please refer to our earnings materials relating to this call posted in the investor section of our website and our filings with the SEC and the ASX.

We will also discuss certain non-GAAP financial measures, a description of each non-GAAP measure, and a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure can be found in our earnings release and earnings presentation located in the investor section of our website. With that, I will now turn the call over to Matt to discuss the third quarter results and operational highlights on slide three.

Matt Wilson, President and CEO, Light & Wonder: Thank you, Rob. Hello, everyone. Thank you all for tuning in today for our third quarter results. I’m pleased to share that our strong execution on our product roadmap and game performance enabled us to deliver robust earnings growth and cash flows. Consolidated revenue for the quarter increased 3% year over year to $841 million. Importantly, consolidated Adjusted EBITDA grew double digits year over year to $375 million, an 18% increase supported by record margin expansion across all three businesses. Additionally, Adjusted EBITDA for the quarter grew 25% year over year, and Adjusted EBITDA per share, or EPS, increased 35% year over year to $1.81. Pleasingly, we continue to improve our quality of earnings, with gaming operations once again emerging as an area of strength. Our teams delivered meaningful sequential install-based growth of over 850 units, including Grover.

Additionally, recurring revenue grew 14% year over year, which accounts for approximately 69% of our consolidated revenue in the quarter. This high flow-through business is a key driver of our cash flow flywheel, which we expect to further enhance through our continued investment and execution on our roadmap. We remain intentional and committed to our capital allocation strategies. This quarter, we returned $111 million of capital to our shareholders through share repurchases, remaining nimble in the face of any near-term opportunities as we transition to a sole standard listing on the ASX, scheduled to take effect on November 14 in Australia, where we have been listed since May of 2023. I want to thank all of our stakeholders and advisors for their hard work and support during this transition.

We are confident our move to the ASX will provide significant shareholder value in the next step of our company’s journey and enable us to enhance Light & Wonder’s profile in a market that is attuned to the gaming industry. Turning to slide four for an update on our Grover charitable gaming integration, we have now seen a full quarter’s worth of contributions from Grover, with over $40 million in revenue and 229 incremental units added sequentially. Since we announced the acquisition, over 830 units were added to the fleet, bringing the Grover install base to over 11,250 units. Our focus remains on the seamless integration of Grover into game development and technology platforms, and we are pleased with the progress the Grover team has made in building out its teams in anticipation of the growth ahead.

Our new office and studio in Raleigh, North Carolina, which will serve as Grover’s headquarters, soft opened in late October, and we expect to complete the build-out later this year. The Indiana market launch, as our sixth operational state, is progressing well. Importantly, we’ve built out a dedicated and experienced team locally to be fully prepared for launch needs. We remain incredibly excited about the vast potential of Grover and its contributions to our diversified business model and look forward to key Light & Wonder game launches into the charitable gaming market in early 2026. Moving along to slide five, we’ve continued to deliver on our core strategy by leveraging and prioritizing our robust R&D engine across complementary channels to deliver engaging content experiences as one of the leading cross-platform global games companies.

We foster a high-performance culture with talent and a deep bench led by a leadership team with a proven track record, a highly valued asset in this industry. Our financial profile is impressive, with high margins and cash-generating recurring revenue streams that enable meaningful capital creation. We execute on a disciplined capital allocation blueprint to create sustainable shareholder value. We are truly unique among our peers in both structure and operations, operating across multiple industries that have high barriers to entry. I will now take you through our segment results and highlights. On slide seven, you will see that we’ve provided a summary of our revenue and profitability by business. What I’m most impressed with in this quarter is the margin expansion across all verticals. Oliver will provide more details into the growth drivers and outlook later on the call.

Turning now to the gaming business performance on slide eight, you will see that gaming revenue was primarily driven by strong gaming operations performance, which increased 38% year over year to $241 million on North American units installed and $40 million on Grover contributions. Looking ahead, we expect momentum to continue in North America on strong gaming hardware releases introduced at AGE and G2E, as well as the continued expansion of the charitable gaming business with our entry into Indiana in the coming months. The decline in gaming machine sales was largely in the international markets, which was adversely impacted by the large in-town order of 3,600 units in the prior year and our out-of-cycle hardware churn in Australia.

Going into the fourth quarter, we expect a sizable order of our SSBT, or sports betting terminals, in the U.K., as well as previously discussed Asia demand that had shifted in timing. Our systems and cable businesses both saw modest growth in the quarter, with systems supported by higher international hardware sales. We expect the business to continue its growth trajectory underpinned by customer-centric innovation. Cables revenue increased on higher utility sales in North America as we continue to expand our product offerings and pipelines. We received strong feedback on our Obsidian offering, and the new team led by John Hanlon is well equipped to capitalize on domestic and international electronic table games opportunities over the coming years. Here is an in-depth look at our gaming KPIs on slide nine. We now have 47,240 installed base units in North America.

Excluding the 11,255 units at Grover, North American premium units have grown for 21 consecutive quarters and now account for 52% of the total North American install base. This is a true testament to our game performance and pricing precision of our commercial strategy. In North America, average daily revenue per unit declined on a reported basis due to the inclusion of Grover units. However, excluding Grover, our North American install base revenue per day increased 5% year over year, primarily driven by wide area progressive performance amid a resilient gaming backdrop and strong GGR. Importantly, we continue to lead in the new Islands Games Index with three out of the top five indexing new premium lease and WAP games with our Ultima Firelink and Huff & Puff franchises.

North American gaming machine sales remained strong with over 6,000 units shipped in the quarter despite the difficult year-over-year comparison and softness within the international segment. Light & Wonder’s scale and global presence enabled us to be a meaningful participant in all markets. Just recently, we entered the Nebraska Skill Game market and commenced trials in the Eastern European Dynamic Multi-game market. We see ample opportunities for our products to reach new markets that will be coming online and available to us. In the latest Eilers report, we saw Piggy Bankin’ Breakin’ debut at number one as the top indexing new video reel game and Dragon Spin Saga Fire & Water rounding out the top five, reflecting our continued commitment to building great for sale games. We showcased an exciting lineup at G2E, as shown on slide 10.

The feedback on our cabinets and games from our operator partners was encouragingly positive. I am thrilled with the launch of Light & Wave and expect our Cosmic Cabinets, along with our proven franchise extensions, to fuel our install base and game sales growth underpinned by our differentiated R&D engine. Turning to Syfy on slide 11, Quick Hit Slots and 88 Fortunes once again delivered record quarterly revenues, their 15th and 5th consecutive quarters respectively, as they continue to ramp with exciting slot content and features. The year-over-year revenue decline in the quarter was primarily attributed to the decreased number of average monthly payers at Jackpot Party. Despite the softness, we’re able to grow the other games within the game portfolio, and we continue to invest in building and deploying engaging games through our omnichannel strategy.

Monetization remains strong, with average monthly revenue per paying user up 11% year over year to over $126, and average revenue per daily active user maintaining a record level at $1.08, with 4% year-over-year growth. From a profitability perspective, we continue to see significant progress in our direct-to-consumer platform, which grew to 20% of DTC’s revenue, up from just 12% a year ago, and putting us well on track to reach our 30% target by 2028. There is continued runway for wider deployment and adoption, which we expect to further expand margins going forward. Regarding Jackpot Party, we have seen stabilization and opportunities to return to growth with a revamped game economy and increased efforts around unregulated sweepstakes gaming. There is reason to believe the general environment will improve as initial data from states where the ban is in effect becomes available.

At the same time, we will return to our roots and execute on our success drivers over the past three years, fine-tuning our acquisition, engagement, and monetization flywheel, as you can see here on slide 12, which will enable us to get back on track. In terms of UA, we will remain efficient and continue to focus on ROI opportunities through innovative marketing efforts. Engagement will also be closely assessed and enhanced with meta features and more LAN-based games to drive cross-platform play. Ultimately, we plan to take a prudent approach to monetization while providing our players with a robust game experience they enjoy. This is a process we will continue to navigate over time, but we remain confident in our teams and the broader portfolio of great games to drive a return to sustainable growth.

Moving to iGaming on slide 13, we delivered record revenue of $86 million in the quarter, up 16% year over year, driven by continued strong momentum in North America, underpinned by first-party content proliferation in the U.S. market and growth in our partner networks. In fact, seven out of the top 10 games across our OGS network were first-party game titles, led by Pirates 4 in the number one slot, followed by three Huff & Puff games ranking second, third, and fourth on the list, reflecting the strength of our omnichannel strategy and durability of our game franchise expansion. Margin expansion was evident with the proliferation of first-party content, as Adjusted EBITDA increased 42% year over year to $34 million, with Adjusted EBITDA margins up 800 basis points over the same period. This also accounted for our strategic initiatives and realignment of resources.

Wages processed through OGS grew 23% over the prior period to $28 billion with record volumes across all regions and content types, demonstrating the growth potential of our platform and the industry. We remain committed to capitalizing on our iGaming roadmap, as you can see on slide 14. There is genuine player affinity for our game franchises, and we are committed to bringing those games to the iGaming platform broadly. We are slated to launch more player-favorite LAN-based franchise extensions in the fourth quarter, such as Big Hot Flaming Pots Tasty Treasures, Huff & Extra Puff, Ultima Firelink Cash Falls Glacier Gold, and Rainbow Riches Road to Even More Riches 2, just to name a few. Our OGS is regarded as one of the most mature iGaming content aggregation platforms in the industry, connecting studios and operators in over 40 regulated markets and over 7,500 operator connections.

Its reach has enabled studios to scale their games across various jurisdictions, as seen with Lightning Box and ELK, whose GGR has grown over the years. ELK Studios is in the process of expanding its U.S. presence with a pending license in Michigan as we expand the audience for these digital native studios and games. International expansion remains an opportunity for growth. We recently received approval to go live in the Philippines as the first licensed iGaming supplier, and we are very excited about the prospects, given that we are one of the leading LAN-based slot suppliers in the region. We are confident that investments in the iGaming portfolio will be further accentuated with the support of our team’s focused execution. We will continue to leverage our leadership position and expand our robust portfolio to capitalize on the opportunities available to us.

As we close out the year, I want to commend the team on their resilience and dedication, as they executed on several key operational and financial initiatives simultaneously. It’s quite a feat to navigate the broader environment this year, but we’re able to deliver growth and profitability supported by a solid business model underpinned by differentiated R&D mode. I will now hand it over to Oliver to go over our financials. Oliver. Thanks, Matt. First, I’d like to note that we’ve expanded our financial reporting this quarter to include a detailed reconciliation of the non-GAAP profitability metrics aligned with the Australian market on slide 16. We expect to provide this level of detail on an ongoing basis as we transition to a sole-standard listing on the ASX. Turning to the results, this quarter reflected continued earnings growth driven by our disciplined execution.

Consolidated revenue growth was driven by strong gaming revenue with contributions from Grover and another record iGaming quarter, fully demonstrating the performance of our game portfolio. Net income increased 78% year over year, primarily driven by revenue growth and continued focus on operational efficiencies, as evidenced by Adjusted EBITDA margin expansion across all businesses. This led to consolidated Adjusted EBITDA and adjusted EPSA growth of 18% and 25% respectively year over year. On a per-share basis, net income per share on a diluted basis increased by 89% to $1.34, compared to $0.71 in the prior year period. Adjusted EPSA per share increased 35% to $1.81, compared to $1.34 in the prior year period. Our continued focus on operational excellence and disciplined execution once again drove meaningful year-over-year consolidated Adjusted EBITDA and adjusted EPSA growth you see here on slide 17.

In gaming, margin expansion in the quarter was primarily driven by North American gaming operations units installs and higher revenue per day led by the performance of our wide area progressive units, as well as the contributions from Grover. Product mix was also a factor in the quarter on higher gaming machine sales in the prior year. Looking forward, we expect our gaming Adjusted EBITDA margin, inclusive of Grover, to trend in the low 50% range based on product mix and currently estimated mid to high single-digit million-dollar range of quarterly tariff impact starting in the fourth quarter and into 2026. SciPlay continues to drive meaningful profitability, evidenced by DTC growth to 20% of the revenue in the quarter. The team has formulated a solid blueprint around our user acquisition initiatives and will deploy efforts prudently based on the potential ROI and seasonality.

Historically, the fourth quarter is more of a competitive market for ad spend, and therefore it is likely we will ramp UA spend back up in 2026. We continue to see solid performance at iGaming, as both revenue and Adjusted EBITDA were record levels for the quarter. Our decision to realign resources to the most impactful areas of the business is paying off with revenue and first-party content growth contributing to margin expansion. I’d also like to note that the now discontinued live casino business had approximately $3 million of Adjusted EBITDA impact in the prior year and will have a residual impact into the first quarter of 2026 from a comparability standpoint. Our corporate and other expenses are also realigned to better fit our business needs, and we expect this to scale proportionally as we continue to grow the business with some legal expense potentially shifting into 2026.

From an adjusted EBITDA perspective, the 25% growth was largely driven by AEBITDA increase with record margins across all businesses. This was partially offset by increased depreciation and amortization from the inclusion of Grover units and success-based gaming operations CapEx, as well as interest expense as a result of higher outstanding debt associated with the Grover acquisition and share buybacks. I would like to provide some color on some of the non-operational items that are expected to impact adjusted EBITDA as we close out the year, given the listing transition quarter. We expect amortization of intangibles and interest expense to continue to trend up year over year on the Grover acquisition, with interest volatility also driven by our share buyback program in the fourth quarter as we transition to a sole listing on the ASX.

From a tax perspective, our effective tax rate is expected to remain between the 21%-24% range. Overall, we remain confident to land within both our full year 2025 targeted consolidated Adjusted EBITDA and adjusted EBITDA range, accounting for Grover, which we provided on the previous call. Turning to slide 18. Cash flow continues to be a focus of the organization, as we generated operating cash flows of $184 million in the quarter. Free cash flow was $136 million, a 64% year-on-year increase, led by earnings growth and lower cash tax payments. Importantly, we intend to drive further improvement in our working capital cycles, inventory position, and capital expenditures to improve cash conversions over time, in addition to growing our top line and managing our cash tax payments and interest efficiently in response to broader environmental changes.

Our goal is to continuously improve free cash flow through the quality of earnings on growth of our recurring revenue business, amplified by continued execution on our key cash enhancement initiatives. Here, you’ll see that we’ve trended positively over the past nine months from a cash conversion perspective and ended the quarter with a 36% conversion rate based on consolidated Adjusted EBITDA, translating to an 89% cash conversion over our adjusted EBITDA metric, both up significantly from the prior year. We remain committed to meaningful cash flow generation over the long term as we continue to scale and optimize efficiency across the company. Moving to our capital structure on slide 19, our net debt leverage ratio for the quarter remained within the targeted range at 3.3 times on a combined basis, following completion of the Grover acquisition, which was financed through our $800 million term loan A.

We recently issued new $1 billion 6.25% senior unsecured notes due in 2033. With the proceeds, we redeemed the 7% senior unsecured notes due in 2028. We paid our outstanding revolver credit facility borrowings with related fees and expenses and added cash to our balance sheet for general corporate purposes, which included providing available funding for our share purchase program as we maintained $1.2 billion of available liquidity. This enabled us to further optimize our existing debt structure with an average tenor of five years by extending bond maturity from 2028 to 2033, while also reducing the interest rate from 7% to 6.25%. Our effective net interest rate is approximately 7.2%, with fixed versus floating debt mix at 55% versus 45%. We will continue to strategically look for avenues to optimize our capital structure through opportunities when available.

Our capital allocation framework remains the same, as you see here on slide 20. R&D is the engine of our business, and we remain committed to investing in our growth initiatives with targeted R&D and CapEx allocation of 17% of our consolidated revenue. This enables us to continue developing our content across our verticals to drive sustainable growth over the long term without compromising our short-term targets. We also remain committed to returning capital to shareholders, with $111 million of shares repurchased, or approximately 1.2 million shares during the quarter. Subsequent to the end of the third quarter, we repurchased an additional $101 million of shares, with residual buyback capacity of $735 million remaining on our existing authorized program as of October 31, 2025.

The company completed $765 million of its total authorized $1.5 billion share repurchase program as of the end of the third quarter, and since the initiation of the prior share repurchase program in March of 2022 through October 31, 2025. Overall, the company has returned $1.5 billion to shareholders through the repurchase of approximately 19.9 million shares, representing approximately 21% of the total outstanding shares prior to the commencement of the programs. We retain discretion to accelerate repurchase activity to capitalize on opportunities to deliver enduring value creation for shareholders and currently expect to utilize a meaningful share of the remaining available capacity prior to the end of 2025, while preserving a healthy liquidity position. Pending the extent of the share repurchases, our leverage may move slightly above the high end of the range in the near term.

However, we would expect to quickly return within our targeted range, underpinned by the strong cash generation of our business. Importantly, we maintain a highly flexible capital structure, which allows us to deploy balance sheet capacity opportunistically when appropriate, with flexibility to undertake buybacks on both the NASDAQ prior to the Z-list and the ASX, with intentions to be active, subject to regulatory approvals. Absent any capital allocation opportunities, we aim to position at the lower end of the target range over the long run. Overall, our priorities will be thoroughly planned through a disciplined capital allocation approach, which we expect will create sustainable long-term shareholder value. As we close out 2025, I would like to thank our team for their continuous efforts executing on the various initiatives we have in place.

We will continue to deliver exciting and engaging new games across our channels, leveraging the latest technologies and creating an exceptional customer experience. With that, we’ll turn it over to the operator for your questions. Operator. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press Star, followed by the number one on your telephone keypad. If for any reason you would like to remove that question, please press Star, followed by the number two. In the interest of time, we do ask that you please limit yourself to one question. Again, to ask a question, please press Star, followed by the number one. The first question we have comes from Barry Jonas with Truist. Your line is open. Great. Thanks. Hey, guys. We are a bit over a month into the fourth quarter.

Curious how you see the quarter shaping up to hit your 2025 guidance. What are the key building blocks or opportunities as you see them? Thanks. Yeah. Thanks. In the business, I think the U.S. sales number was a highlight for me. Over 6,000 gigs, contributions from the adjacent markets. Grover’s looking like it’s absolutely nothing. Another 229 gigs in the quarter grew very nicely over that period and made a full contribution in the quarter of $40 million. I think margins. And that all added up to a result in Q3. Business. Less work to do in the fourth quarter than we had. Yeah. Month. Yeah. I think this third quarter, 65% of the business was nature, so very predictable in terms of our earnings. Obviously, a few things to close down as we round out the year over the next eight weeks.

Maybe I’ll want to kind of fill in some of the blanks there. Yeah. Thanks, Matt. I think, as you said, it kind of starts with our recurring revenue businesses. That remains very strong as evidenced with our Gaming Ops growth, the addition of Grover here. We can continue to see momentum as we head into the fourth quarter. Great tailwinds there. I think North American outright sales performance remains strong for us. That is really driven by the game performance that we’ve seen over the last several quarters. We expect that continuing into the fourth quarter. You would have remembered, Barry, last quarter we kind of previewed that Canadian ELT were shifting into the second half. Ultimately, that will help kind of drive outcomes for us.

International game sales, that’s going to be, I would say, slightly impacted by timing of certain Asia and away slipping into 2026 in the Philippines. We still maintain kind of our share in Asia, and we expect our AZ farms and share to get back to kind of our rightful share gains here as we head into 2026. I would say on the other side of the recurring revenue, we expect continued scaling from a DTC perspective and side play. We had very strong 1PP share performances in the quarter. We expect that to continue as we close out the year. I think lastly, you heard me say this on various marks, but the tariff impact is expected to be called a mid to high single-digit impact starting in Q4 and something that we’ll continue to kind of work through.

That all said, we expect a strong fourth quarter with line of sight to that 25 target range that Matt kind of mentioned. That is going to drive another double-digit growth year for us. That is going to be outperformance relative to the broader industry. We certainly expect to continue to execute against our strategy. Lastly, what I would say is, and I want to be very clear on this, we are not going to compromise the long-term growth of this business to hit short-term goals. We are going to continue to invest into the business, into the quality of the earnings that we are going to be delivering over time. Still some work to be done, but we have line of sight to a lot of great momentum across the business. Got it. Okay. Thank you very much. Thank you. Thanks, Barry.

We have your next question from Matt Ryan with Barrenjoey. Please go ahead when you’re ready. Thank you. I was just hoping to get an update on Grover. It looks like you’ve added some more boxes in the quarter. Just can you tell us about, I guess, the integration with the broader Light & Wonder content and just also just more specifics on Indiana as a launch? Yeah. I’ll take that. Yeah. I think great quarter for Grover, added 229 games for the period. The first full quarter of contribution from Grover in the third quarter. I think the team’s doing a fantastic job integrating into the broader Light & Wonder family. They had a great showing at G2E. Matt, I know you were there, and a number of other people on the line were. The business is performing very well.

You’ll start to see our games, the Light & Wonder games, show up on the Grover install base early in 2026. We are getting ready for Indiana market entry. It looks like it may have shifted into the first quarter, just the regulations taking a little bit longer than we had anticipated. We do not see any issue to the long-term nature of that market. It is still going to be a big and vibrant market, and we’ll start to scale the install base over 2026. We opened the Raleigh, North Carolina head office in the period, which is great. We’re starting to staff up there. There are content and technology teams going into that facility led by Brian Brown, obviously. We’ve opened up an integration center in the Indiana market. Things are set up really nicely as we turn the page into 2026.

You’re seeing that nice sequential addition of games quarter after quarter. Indiana will be a growth driver for us in the first quarter. Yeah, looking like at this point, a great piece of M&A and a part of the portfolio that belongs in the broader ecosystem of Light & Wonder. It really encourages where we stand with Grover. Thank you. Your next question comes from Chad Beynon with Macquarie. You may go ahead. Hi. Good afternoon. Thanks for taking my question. Matt and Oliver, I know the original guide for Q3 was for low double digits. You clearly exceeded that. It looks like most of the beat or a lot of the beat came from the gaming margin, more in the mid-50% versus the low 50%. Can you double-click a little bit just into that flow through for Q3 in gaming? I know there’s some noise.

Obviously, integrating Grover, but anything to help there would be helpful for us. Thank you. Yeah. I thought it was a fantastic quarter again from the entire team. We guided to low double digits in the third quarter. We delivered 18% growth. Clearly, pasting ahead of our expectations and what we committed to the market. A big driver of that was gaming, and in particular, the gaming operations business, which has added a lot of games in the period, 639 in the period, over 2,800 year on year. It is a powerhouse of a business for us and great tailwinds there, driven by great game performance. We think that can continue in the fourth quarter and beyond. We have got a lot of momentum there. Maybe, Oliver, you want to touch on the margins and the mix and maybe the fee per day agreements. Yeah.

Thanks, Matt. Yeah, I think broadly speaking, as we kind of head into the fourth quarter, the one thing I did miss, actually, in the last question is the sizable SSBT order that we’re going to have in Europe. Certainly, that’s going to have a product mix impact, even though we’re continuing to scale our recurring revenue businesses. We grew our RPDs 5% year over year. The quality of our recurring revenue business continues to be very strong. Ultimately, product mix will play a part into kind of broader mix. I think overall, with tariffs, including kind of the gaming sales mix, I think you’ll start to see a more normalized kind of gaming margin as we move forward. Thank you both. We now have Andre from UBS on the line. You may proceed. Thank you. Good morning.

I was just wondering if you could talk about the sort of level of demand that you’re seeing at the moment and conversations you’re having with customers as they build their budgets for next year, for example. Tax incentives on accelerated depreciation, entering those conversations. What’s been the response and uptake on Light & Wave? Just curious to hear how that sort of demand environment’s shaping up. Yeah. Pleasing to say the market’s proven to be very resilient. I think it wobbled a little bit there in the second quarter after Liberation Day for obvious reasons. Just given where GGR levels are at, reinvestment levels seem really high from a customer perspective. I saw the Islands note out today just talking about forward-looking intentions for replacement cycle ticking up. I think that’s just a function of the quality of games that the market’s producing.

I think operators know to compete, you’ve got to have the best games on your floor. We’re seeing that through a solid replacement rate across the market. I think you’re also seeing that constant tick up of the percentage of the floor that is premium. I think that ticked up to 15% or 16% in this latest slot survey. I mean, that’s a great tailwind for the industry. We continue to put our best games into that category. I think customers know that their best players want to play the best games. Having those available on the floor is a great thing. Yeah, I think all in all, where we stand today, the consumer looks resilient, particularly the gaming consumer looks resilient. That’s flowing through into GGR and good forward intentions for purchasing demand.

I think as we turn the page into 2026, it’ll be interesting to see if that flows through the one big beautiful bill, accelerated depreciation, dynamic flows through into budgets. We’ve heard from a number of customers that they’re thinking about how do they best take advantage of that to maybe potentially accelerate some of their replacement market. Each customer is different, and they’re thinking about it differently. We’ll monitor that closely as we turn the page here into 2026. For us, it’s really focus on the controllables, build great games, take share in the market. I think it looks like we did take share again here in the third quarter, which was fantastic with over 6,000 units shipped. Testament to Siobhan Lane and the entire gaming team. Anything to add, Oliver? No, I think you said it.

We spent some time with customers at G2E, and exactly to your point, Matt, some kind of indicated opportunities for accelerated depreciation especially some of the bigger regionals. We’ll continue to kind of work with our customer base to ensure they understand kind of the benefits of those components. Also, to your point, Matt, product roadmap, not only just on the software side, but also the hardware that we’re coming out with will continue to spur kind of opportunities for us to gain share. Thank you. We have David Katz with Jefferies on the line. Afternoon, everybody. I wanted to ask about iGaming and SciPlay. Both. When we look at the setup, right, with revenues that aren’t growing, but there is a benefit of DTC mix in there that’s driving some profitability with it. How far does that really go?

I know you’ve talked about a DTC target mix, but can at some point the revenues start to grow again? Or how are we thinking about that longer term? Yeah. So I’ll address the SciPlay question that you laid out there. Yeah. It was a quarter where we didn’t grow the top line to our expectations. And it’s a portfolio of games, David, as you know. We’ve got some very fast-growing games, Quick Hit Slots, 88 Fortunes, Monopoly, all grew nicely in the quarter. Really, the drag on the portfolio has been Jackpot Party and Goldfish. These are big mature games that have been in the portfolio for over a decade, have been growing ahead of market for the last 10 years. The good news is we’ve stabilized those two games.

As we can get those back into growth mode, it kind of lifts the tide for the entire portfolio across social extension. I’ll say from the outset, Jackpot Party, in particular, is not where we want it to be, and we need to work hard to get that back into growth mode. Josh is doing a lot of work to focus on that. We’ve been fairly public about the impact of Sweeps on this category. We see some data in markets where Sweeps is being eliminated, and we’re seeing a subsequent uptick in the social casino market. We think as that manifests over time and the deregulation of Sweepstakes, I guess, happens over time, that’ll be a tailwind for the social casino sector. We don’t really control that. What we can control is the economies that we can optimize in our game.

We do think we get revenue back to growth mode in 2026. As we get those games dialed in and we have the benefit from Sweeps. The direct-to-consumer benefit is real. A year ago, we were at 12% of revenues with direct-to-consumer. It’s 20% now. In May, we guided to 30% by 2028. Clearly, we’re pacing well ahead of the direct-to-consumer mix. We feel like we can accelerate beyond that target over time. There’s a real tailwind from a margin perspective on direct-to-consumer. We’ve got to focus on getting the top line growing again. That’s the focus of the team at the moment. Yeah. Maybe just one quick add, just from a monetization perspective. I mean, that continues to improve year over year. David, I think the fundamentals seem to still be there, which is great.

Josh and the team know how to run and grow games to Matt’s point. If you look at ArcDAO, that grew almost 4% year over year. Our Amber Poo grew almost 11%. If you look and just peel the onion back, there are certainly some favorable trends that we are going to continue to try to build on. I mean, you called it. That is going to be an area that we are going to continue to focus to drive this back to growth over time. Got it. Thank you very much. Thanks, David. Your next question comes from Rohan Sundram with MST Marquee. Please go ahead. Hi, Matt, Oliver and Zane. Thank you. Just the one for me. Oliver, can we please just revisit your commentary around the gaming EBITDA margins where the expectation is to trend towards 50%? Just the timing of that.

Within that, you mentioned Grover. Are you saying that Grover is a negative mix shift, or did I get that wrong? On the tariff side of it, where do you see scope for mitigation, if not already? Thanks. Yeah. Thanks. Yeah, I think the benefit that we got in the quarter, certainly, as Matt mentioned before, was product mix. As we head into the fourth quarter, sorry, getting a little feedback, with the SSBT orders and game sales probably a bit more prominent in the quarter, we should see a more normalized kind of mix. Grover Gaming is not a detriment to our margins. In fact, it is a margin enhancer for us. It is a free cash flow driver for us at the end of the day. As our recurring revenue, and I think Matt mentioned this earlier, 69%.

In Q3 of mix of recurring revenue, as that continues to kind of scale over time, that’s just going to drive even better margin and free cash flow outcomes for us. Yeah, I would expect that to continue over the coming period. It will just be kind of timing of game sales, international, etc., that will kind of fluctuate margins from time to time. To your question regarding tariffs, yeah, listen, I think Anthony Fermani and the team have just done an incredible job of mitigating our way through most of this year. The reality is we’ve kind of worked through the majority of the pre-tariff inventory at this point. We will now start to see impacts to kind of that mid to low—sorry, mid to high single-digit millions as we go forward.

That’s something that we and the team are going to continue to look at through the margin enhancement initiatives to see what we can mitigate. We wanted to just be open and forthright with you all about what we see at the moment. Thanks, Oliver. Thanks, Rob. We have Ryan Siegdahl with Craig Hallum. Your line is now open. Please go ahead when you’re ready. Hey, good afternoon. This is Will on for Ryan. Thanks for taking our question. I wanted to ask about iGaming. You organized the business a little bit. I think you saw the best growth in nearly two years. What do you think is going to be the major driver for this going forward? How do you feel about your positioning now versus where it might have been a few years ago? Thanks. Yeah, great question. A real bright spot for the quarter, actually.

They grew 18% revenue, 42% EBITDA. Great translation of the operating momentum into financial results. It is really about the simplification of the business. We went back to basics. This business is really driven off great content, great 1PP content in particular. That is what drives the lion’s share of margin in this business. We have really focused on that. We saw the launch of Huff and Puff, the family, into the channel in the U.S. It has got to 5% of the entire market in the U.S. is Huff and Puff in the period, which just is a testament to how great, high-quality land-based games can translate into great success in the digital iGaming market. Very encouraged by that. We have reorganized the business into one content team across all the channels led by Nathan Drane.

Really syncing up all of those content teams across the globe to bring that content to bear on the iGaming market. Great performance from Huff and Puff in the U.S. And then one of our digital native products called Pirates 4 had a record result in the period as well. That is kind of in the European market. Just a testament to the quality of games and what that can do for the portfolio. Simplification of the strategy, I think, is really kind of turbocharging iGaming. Really pleased with that result and the team’s delivery. Thank you. We have Justin Barratt with CLSA on the line now. Hi, guys. Thanks for your time today. Just noting your comments, I guess, around that mid to high single-digit millions of increase in terms of cost due to, directly to, tariffs.

I want to understand what you think you can do to mitigate those costs, and particularly, I guess, from the pricing side of things. Should we sort of see a subsequent or a partially offsetting increase in ASPs to help there? Yeah. Thanks for the question. Yeah. I think we’re kind of evaluating as we kind of move into 2026. Part of that is our kind of pricing structure, but also our hardware strategy and content strategy. Putting out new content, new hardware that gives us the ability to price up as well as some of our existing kind of legacy cabinets. I think we’ll work with our partners and our customers to make sure that we have an optimal outcome for the industry first and foremost. This is not a Light & Wonder specific issue. This is going to be.

An issue that many industries and many companies within gaming as well will have to deal with. We have the best team kind of working through that, led by Anthony Fermani, led by Mike Lorelli in the strategy team as we kind of navigate through other opportunities to drive margin enhancement. We have been doing this for now several years, right? I think we have proven that this is a strong skill set for us as an organization, and we will continue to find ways to try and mitigate that. As I said earlier, we just wanted to provide that visibility to you all. Matt and I are going to charge the team hard to figure out ways to compensate for these increases, whether that is through pricing or whether that is through cost opportunities. Thank you. Your next question comes from.

Jeff Stantial with Steve on the line. Please go ahead. Hey, good afternoon, Matt, Oliver. Thanks for taking our question. Wanted to double-click on David’s question from earlier on SciPlay. Matt or Oliver, can you just maybe unpack for us or explain for us a little bit more some of the actual blocking and tackling that goes in in terms of stabilizing Jackpot Party? The monetization gets disrupted. Some players have a bad experience. How do you actually go back out and sort of bring them back in after reversing some of those changes? And as a corollary to this, are there sort of learnings going through this experience that you could take kind of moving forward? Thanks. Yeah. So it’s really a Jackpot Party specific issue. You can see Quick Hit Slots, 88 Fortunes, Monopoly all growing really well in the period. So it’s not about.

The team’s inability to drive games. It’s specific about Jackpot Party, which is a very mature game with a pretty complicated economy that’s been built over time with a kind of laddering up of live ops features. What this is really about is getting kind of our large players re-engaging and spending at the levels they had spent at previously. Josh is driving changes to store logic and some of the live ops to just get that re-engagement back to levels that we’ve seen previously. Like I said, it’s a pretty convoluted set of live ops that kind of are entangled into the economy. It’s really about making sure as we change one thing, we’re not breaking another. Josh is working on this specifically. We’re seeing stabilization of that game over time.

We’re going to continue to work on optimizing the store logic to kind of re-engage those players the way that I mentioned earlier. Again, also taking some of these learnings into our other games, Quick Hit Slots, 88 Fortunes, and Monopoly, and making sure that the simplicity of the way we design these things is the most important thing. I guess to say all that, the game is stabilized. It’s set to return to growth in 2026. We’ve got a portfolio of games like everyone does in the space. Some are growing at faster levels than others. This is really kind of a Jackpot Party specific issue that we’re facing. Thank you very much. We have Adrian Lemme with Citigroup. Please go ahead when you’re ready. Good morning, Matt and Oliver. Very strong margin improvement across the businesses.

I was interested in the R&D spending being down. 6% to $62 million in the quarter. Can you talk to what drove this. And where we should expect to see that in future quarters and whether you see any impact on the future pipeline, please? Yeah. No, like I said earlier, R&D, CapEx, that’s the core of our business, the foundation of our business. If you actually look at, and what we’ve constantly guided to, is that 17% of our revenue is going to R&D and CapEx. Some of that will flow between the two. So if you actually take the two pieces and add those together, pretty much right at 17% actually for Q3. So it’s going to be an area that we continue to lean in on.

Nathan continues to kind of re-evaluate kind of his structure, what he needs to be able to sustain growth in all segments of the business. I do not think Matt and I have said no to Nathan yet as he has brought really strong high ROI investment asks over the years. We will continue to kind of work through. Really just efficient capital allocation strategy, which has not really shifted. CapEx, R&D, 17%, we are going to continue to kind of drive to that. As our revenue grows every single year through this kind of 2028 period and beyond, that just gives the teams much more ammunition to be able to execute on our long-term strategy. Great. Thanks for clearing that up. We have Liam Robertson with Jarden on the line now. Hi, thanks, guys. Just quickly on the quantum and velocity of bringing new games to market.

Sounds like you’ve got plenty of confidence moving forward. From what I understand, your new Carbon platform has been operational for about three months. Can you just talk to how that improves your ability to deliver new games across both LAN-based and iGaming? Yeah. Carbon’s an initiative we’ve been working on for some time. Really, kind of the catalyst for us to accelerate that was Grover, being able to get our games onto the Grover platform very quickly. Victor Blanco, who I think is the best CTO in the industry, is driving that initiative. It’s more broad than just getting it onto Grover. It’s building it once and then being able to deploy it across all the channels that we operate in. I’d say we’re still very early innings.

There’s been a bit of a rebuild of the Carbon platform to adopt some best-in-class AI tools that are going to help us go faster and further with Carbon. Yeah, that will manifest over time. I think the lineup of games is stronger than it’s ever been. We launched more games this year than we have in our history. We also launched four new variants of hardware at the G2E show. Yeah, the R&D teams are bringing in great game content across all the channels, great hardware. You’re seeing that show up in the Eilers charts. We had a record level of number of high-performing games on the premium charts, as an example. We took the number one spot in the core for sale Eilers chart. Yeah, really comfortable with the quality of the games coming out of the R&D organization.

The efficiencies we will get as Victor scales the Carbon platform over time will really play through nicely across all those channels. Thank you for the question. Cheers. Thank you. Just a reminder that Star wanted to ask any questions. We now have Harsh Singh with Bank of America. Your line is open. Matt, Oliver, thank you. A couple of questions from my side. One, can you talk about the sustainable margin levels in iGaming? Do you think it should sustain above the 40% levels in future as well or close to that? Secondly, can you help us update on the international business outlook into Q4 and next year? What is the pipeline looking for Australia? Thank you. I will take the iGaming margin question.

I think the iGaming margin that we referenced earlier was really a combination of kind of structural as well as operational levers. We did, and I believe I called this out in the prepared remarks, but we did benefit from the live dealer business and exiting that live dealer business. The comp kind of from a year-over-year perspective helped us. I think that was about a $3 million drag in the prior year. If you kind of normalize that out, yeah, the one percentage point share aspirations that we have over the next several years will help us sustain those kind of normalized margins as we move forward. That is obviously a focus of ours, as Matt mentioned, in terms of getting the right content in place and then proliferating those across the region. Matt, I do not know if you want to touch on the other items.

Yeah, international sales. So yeah, this is a tough thing for analysts to unpack sometimes because you do not get the same visibility in the international market as you do in the Eilers analysis in the U.S. So probably three parts of the international story. The first one being the EMEA region. And there is a little bit of noise in that result. So in the prior corresponding period, we had a large Entain order, which we have spoken about a number of times in that period in the prior year, which we did not get in this period, although we do get this SSBT order in the fourth quarter in the EMEA region. So I think that is a little bit of the kind of the building blocks to how to think about the EMEA region.

I think from an ANZ perspective, recycling over a very tough corresponding period last year, we were kind of at elevated share levels in the PCP. Yeah, our share levels are a little depressed in Australia at the moment. It’s really a function of getting kind of the content and hardware lineup dialed in. We showed that at AG. We got a lot of strong feedback on the lineup for ANZ. I think as we turn the corner into 2026, we’re set up to kind of grow share in that market again over time. The team’s excited to get their hands on those new games coming through. Thirdly, probably the biggest impact is the cyclicality of the Asia region. As you know, over the years, it’s been very kind of new openings and expansion-driven. There was a bit of noise in 2025.

Calendar year and some things pushed out into 2026. Not a share issue. We’re holding share nicely in that market. It’s just really a function of the cycle. There are a few of the building blocks around international to help you kind of think about how to model that. Thank you. Thank you. I can confirm that does conclude the question and answer session. I would like to hand it back to Matt Wilson for some final closing comments. I might actually just go back to Barry Jonas’s question early on. I know there was an audio issue that came through the line. Apologies for that. Let’s readdress that one. Barry asked the question about Q4 and the building blocks to get there. I guess starting there, Q3 was a fantastic result by the team. We grew 18%, 80% for the quarter.

We guided the market to low double digits. Clearly, the teams outperformed our expectations in the period, which leaves a kind of neater glide path into the fourth quarter. We have reiterated guidance both for the 80% and then pad a line. Like Oliver said earlier, 69% of our revenues in this period were recurring. Good predictability as we turn into the fourth quarter. We have two months to go. There are some big items we need to get over the finish line. The SSBT order is a good example of that. Oliver, do you want to just give us some of the puts and takes and building blocks to think about that Q4 result? Yeah. Yeah. We’ll try this again. Hopefully, you guys can hear me.

Yeah, I think to Matt’s point, it is the recurring revenue scaling that’s going to give us tailwinds as we head into the fourth quarter. I think RPDs grew 5% year over year. Again, we go to bed and wake up in the morning, and that’s incremental revenues every single day. The North American outright sales, we continue to have great momentum in that space, over 6,000 units. I would expect that momentum to continue into the fourth quarter. We had talked about this Canada VLT order shifting from the first half now into the second half. That will provide, again, some opportunities for us. Matt kind of just talked about the international markets, the SSBT orders, and then it’s really DTC and then scaling one PP share from an iGaming perspective.

I think those are kind of the building blocks that we’re working to get to get another double-digit growth. Performance for us, which will be outperforming the broader market. Yeah, we’re really excited about what’s to come. Yeah. Thanks, Oliver. And thanks for bearing with us through some of the audio issues. We’re in Sydney doing this for the first time from down here. We’ll dial this in as we move forward. Once again, I’d like to express my sincere gratitude to all of our employees and stakeholders across the globe. We wouldn’t be here without the collective efforts of all of you and the flawless execution and unwavering support from all of you. To our US shareholders, this is not the end. We would love to have you continue on this journey with us on the ASX moving forward.

Looking ahead, we are looking forward to speaking to all of you in the near future. Thank you again for tuning in and have a great day. Thank you all for joining today’s conference call with Light & Wonder. I can confirm today’s call has now concluded. Thank you all for your participation. You may now disconnect and please enjoy the rest of your day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.