Discussion on Tariff Impacts Dominated Q1 Earnings Conference of Light & Wonder
Revamped Analysis:
Light & Wonder's Q1 Earnings Call
Share this article A lively Q1 earnings call for Light & Wonder was packed with tariff talk, stealing the spotlight from usual financial discussions.
CFO Oliver Chow put it simply, "Tariffs have got our attention." And rightly so, as they stand to creak the industry's supply chain. Chow went on to explain that the company is in sync with the industry when it comes to the magnitude of tariff impact, but they've got contingency plans in place, like shifting sourcing of supplies.
CEO Matt Wilson echoed Chow's sentiments, acknowledging the complex and ever-shifting nature of tariffs. He insinuated that the entire industry would need to navigate through this thorny situation. Wilson confirmed that the company would pass some of the anticipated higher costs onto consumers, as they had during the pandemic.
"We're not overreacting," affirmed Chow, pointing out that they're taking a measured approach to manage these tariff headwinds. To dodge the bullet, they've brought some inventory forward. Their mitigation strategies also involve importing through Mexico.
Wilson struck an optimistic tone, expressing that while the tariff situation is tricky, there's a semblance of sanity returning, allowing them to move forward without extreme measures. As Wilson puts it, "Customers, much like snowflakes, are all different." Some customers are placing orders earlier, while others are hitting the pause button, watching the tariff landscape unfold.
The call also highlighted the positive aspects of Light & Wonder's Q1 performance. Wilson showcased the performance of Light & Wonder and its products, boasting that the company has 10 of the top 25 games in the Eilers & Krejcik customer survey. Furthermore, they ended 2024 with the number one ship-share globally and extended that momentum into the first quarter.
In terms of financials, Light & Wonder is sitting on a cash flow of $1.4 billion for 2025, which remains a steadfast target despite the tariff issues. Q1 net cash flow grew by 11% compared to the previous year, with Wilson anticipating even larger increases in the subsequent quarters of 2025.
Igaming revenues skyrocketed by 30% in the U.S., largely due to exclusive game launches through FanDuel. Additionally, the acquisition of Grover Gaming came with a bonus – the legalization of e-pulltabs in Indiana, a Grover specialty, giving the company a "welcome tailwind."
Light & Wonder has now seen 16 consecutive quarters of revenue growth. Their gaming revenues stood at $495 million, a 4% increase, while gaming operations brought in another $173 million, up 5%. The revenues from their slot machines averaged a daily win of $48 per machine.
Overall, Light & Wonder is proactively dealing with tariff-related challenges by relying on operational efficiency and thoughtful pricing adjustments to limit the impacts on earnings and supply chain operations. While tariffs undoubtedly pose obstacles, the company's resilience shines through as they continue to adapt and press onward.
- Analysts are likely to observe tariff-related discussions in future earnings calls of businesses in the finance industry, following Light & Wonder's emphasis on tariffs during their Q1 call.
- With headwinds from tariffs, Light & Wonder is discontinuing its reliance on certain tariff-affected supplies, instead opting for sourcing from Mexico.
- Technology is playing a crucial role in Light & Wonder's tariff management strategies as they bring inventory forward and leverage importation routes to dodge tariff-related impacts.
- Despite the tariff challenges, technology-driven investments, like the acquisition of Grover Gaming, are providing welcome tailwinds for Light & Wonder's business, especially in the growing iGaming sector.
