Light & Wonder's Q3 Net Income Soars 78% on Services Growth

TL;DR

**LNW is betting big on services and acquisitions, driving net income up but piling on debt – a risky but potentially rewarding play.**

AI Summary

Light & Wonder, Inc. (LNW) reported a significant increase in net income for the three and nine months ended September 30, 2025, driven by strong services revenue growth. For the three months, net income rose to $114 million from $64 million in the prior year, a 78.1% increase. Nine-month net income increased to $291 million from $228 million, a 27.6% rise. Total revenue for the three months increased by 2.9% to $841 million, primarily due to services revenue growing 13.4% to $601 million, offsetting a 16.4% decline in product revenue to $240 million. Operating income for the quarter surged 44.0% to $229 million. The company completed the acquisition of Grover Gaming charitable business on May 16, 2025, which contributed to a substantial increase in goodwill and intangible assets. Long-term debt, excluding the current portion, increased significantly to $4,893 million from $3,847 million at December 31, 2024, reflecting new borrowings under senior notes and term loans totaling $1,800 million. Cash used in investing activities dramatically increased to $1,079 million for the nine months, largely due to $861 million for acquisitions.

Why It Matters

This filing reveals Light & Wonder's strategic pivot towards services and digital content is paying off, with robust net income growth despite a dip in product sales. For investors, the significant increase in long-term debt to fund acquisitions, including Grover Gaming, signals an aggressive growth strategy that could either yield substantial returns or increase financial risk. Employees might see continued investment in R&D and new business lines, potentially creating new opportunities. Customers could benefit from an expanded portfolio of gaming content and services. In the competitive gaming market, LNW's ability to grow services revenue while competitors might be more reliant on hardware sales could give it a distinct advantage.

Risk Assessment

Risk Level: high — The risk level is high due to a substantial increase in long-term debt to $4,893 million from $3,847 million, coupled with $861 million spent on acquisitions for the nine months ended September 30, 2025. This aggressive financing and acquisition strategy, including the Grover Gaming acquisition, significantly increases the company's leverage and integration risk, as highlighted by the forward-looking statements regarding the inability to achieve expected benefits from acquisitions.

Analyst Insight

Investors should closely monitor Light & Wonder's debt management and the successful integration of recent acquisitions, particularly Grover Gaming. While the strong net income growth is positive, the increased leverage warrants caution. Consider if the growth from services and acquisitions can sustainably outpace the rising interest expense and debt obligations.

Financial Highlights

revenue

$841M

operating Margin

27.2%

total Assets

$6,509M

total Debt

$4,893M

net Income

$114M

eps

$1.37

cash Position

$236M

revenue Growth

+2.9%

Revenue Breakdown

Key Numbers

• $114M — Net Income (Q3 2025) (Increased 78.1% from $64M in Q3 2024)
• $291M — Net Income (9 Months 2025) (Increased 27.6% from $228M in 9 Months 2024)
• $841M — Total Revenue (Q3 2025) (Increased 2.9% from $817M in Q3 2024)
• $601M — Services Revenue (Q3 2025) (Increased 13.4% from $530M in Q3 2024)
• $240M — Products Revenue (Q3 2025) (Decreased 16.4% from $287M in Q3 2024)
• $229M — Operating Income (Q3 2025) (Increased 44.0% from $159M in Q3 2024)
• $4,893M — Long-term Debt (Sept 30, 2025) (Increased from $3,847M at Dec 31, 2024)
• $861M — Acquisition Spending (9 Months 2025) (Significant increase from $5M in 9 Months 2024)
• $1.37 — Basic EPS (Q3 2025) (Increased from $0.72 in Q3 2024)
• 81,523,883 — Common Stock Outstanding (As of October 31, 2025)

Key Players & Entities

• Light & Wonder, Inc. (company) — registrant
• Grover Gaming (company) — acquired business
• SEC (regulator) — Securities and Exchange Commission
• JPMorgan Chase Bank, N.A. (company) — Administrative Agent for LNWI Credit Agreement
• Hasbro (company) — licensor of MONOPOLY
• Universal Studios (company) — licensor of Frankenstein and Universal Monsters
• Warner Bros. Entertainment Inc. (company) — licensor of KONG: SKULL ISLAND
• $114 million (dollar_amount) — net income for Q3 2025
• $4,893 million (dollar_amount) — long-term debt as of September 30, 2025
• $861 million (dollar_amount) — acquisitions of businesses and assets, net of cash acquired, for nine months ended September 30, 2025

FAQ

Risk Factors

• Increased Indebtedness [high — financial]: Long-term debt increased significantly to $4,893 million from $3,847 million at December 31, 2024, due to new borrowings. This elevated debt level increases financial risk and interest expense.
• Integration of Acquisitions [medium — operational]: The company completed the acquisition of Grover Gaming charitable business, contributing to a substantial increase in goodwill and intangible assets. Successful integration of acquired businesses is critical for realizing expected synergies and avoiding operational disruptions.
• Acquisition Spending [medium — financial]: Cash used in investing activities dramatically increased to $1,079 million for the nine months, largely due to $861 million for acquisitions. Significant ongoing investment in acquisitions requires careful capital allocation and may strain liquidity.
• Regulatory Compliance [high — regulatory]: As a company operating in the gaming and lottery sector, Light & Wonder is subject to extensive and evolving regulations across various jurisdictions. Non-compliance can lead to significant fines, license revocations, and reputational damage.
• Competition [medium — market]: The gaming and lottery industry is highly competitive, with established players and emerging technologies. Maintaining market share and profitability requires continuous innovation and effective product development.
• Technology Dependence [medium — operational]: The company relies heavily on its technology platforms for product development, service delivery, and operational efficiency. Cybersecurity threats, system failures, or obsolescence of technology could disrupt operations and impact revenue.
• Interest Rate Fluctuations [medium — financial]: The significant increase in long-term debt exposes the company to interest rate risk. Rising interest rates could increase the cost of servicing debt, impacting profitability.
• Supply Chain Disruptions [low — operational]: The production and distribution of gaming products can be affected by disruptions in the global supply chain, potentially impacting inventory levels and delivery timelines.

Industry Context

Light & Wonder operates in the competitive gaming and lottery industry, which is characterized by technological innovation and evolving regulatory landscapes. The industry is seeing a shift towards digital solutions and services, requiring companies to adapt their product offerings and revenue models. Consolidation through acquisitions is also a notable trend as companies seek to expand their market reach and capabilities.

Regulatory Implications

The company's operations are subject to stringent regulations in the gaming and lottery sectors across multiple jurisdictions. Compliance with these regulations is paramount to avoid penalties, maintain licenses, and protect the company's reputation. Changes in regulatory frameworks, particularly concerning online gaming or data privacy, could impact business operations and profitability.

What Investors Should Do

1. Monitor debt levels and interest coverage ratios.
2. Assess the performance and integration of recent acquisitions.
3. Analyze the sustainability of services revenue growth.
4. Evaluate the impact of declining product revenue.

Key Dates

• 2025-05-16: Acquisition of Grover Gaming charitable business completed — Contributed to increased goodwill and intangible assets, indicating strategic expansion.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing significant net income and revenue growth driven by services.
• 2024-12-31: End of Fiscal Year 2024 — Baseline for comparison of long-term debt increase in 2025.

Glossary

Goodwill

An intangible asset that arises when one company acquires another for a price greater than the fair market value of its assets and liabilities. (Increased significantly due to acquisitions, indicating the company paid a premium for acquired businesses.)

Intangible assets, net

Non-physical assets that have value, such as patents, copyrights, and brand names, net of accumulated amortization. (Increased substantially due to acquisitions, reflecting the value of acquired intellectual property and other non-physical assets.)

Operating income

A measure of a company's profit after deducting operating expenses from its revenue. (Surged by 44.0% to $229 million, indicating improved operational efficiency and profitability.)

Restricted cash

Cash that is not available for general use by a company because it is held for a specific purpose, such as collateral or to meet regulatory requirements. (A portion of the company's cash is set aside, impacting immediate liquidity.)

Senior notes

Unsecured debt obligations that rank higher in priority than subordinated debt in the event of bankruptcy. (New borrowings under senior notes contributed to the significant increase in long-term debt.)

Term loans

Loans provided by banks or other financial institutions that have a specified repayment schedule and maturity date. (New borrowings under term loans contributed to the significant increase in long-term debt.)

Foreign currency translation gain

Gains or losses that arise when a company translates the financial statements of its foreign subsidiaries into its reporting currency. (Contributed positively to other comprehensive income, indicating favorable currency movements for the company's international operations.)

Derivative financial instruments

Contracts whose value is derived from an underlying asset, index, or security, often used for hedging purposes. (Unrealized losses on these instruments impacted other comprehensive income.)

Year-Over-Year Comparison

Compared to the prior year, Light & Wonder has demonstrated robust net income growth, with Q3 2025 net income up 78.1% to $114 million and nine-month net income up 27.6% to $291 million. This was driven by a strategic shift towards services revenue, which grew 13.4% in Q3, offsetting a 16.4% decline in product revenue. Operating income also saw a substantial increase of 44.0%. However, the company's financial structure has changed significantly, with long-term debt rising by over $1 billion to $4,893 million, primarily due to new borrowings and substantial acquisition spending of $861 million in the nine-month period, introducing new financial risks.

Key Financial Figures

• $1.0 billion — facility with aggregate commitments of $1.0 billion extended pursuant to the LNWI Credit Ag

Filing Documents

• lnw-20250930.htm (10-Q) — 1763KB
• ex311-q325certificationofc.htm (EX-31.1) — 9KB
• ex312-q325certificationofc.htm (EX-31.2) — 9KB
• ex321-q325certificationofc.htm (EX-32.1) — 5KB
• ex322-q325certificationofc.htm (EX-32.2) — 5KB
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• 0000750004-25-000072.txt ( ) — 11089KB
• lnw-20250930.xsd (EX-101.SCH) — 55KB
• lnw-20250930_cal.xml (EX-101.CAL) — 59KB
• lnw-20250930_def.xml (EX-101.DEF) — 246KB
• lnw-20250930_lab.xml (EX-101.LAB) — 684KB
• lnw-20250930_pre.xml (EX-101.PRE) — 470KB
• lnw-20250930_htm.xml (XML) — 1986KB

Condensed Consolidated Financial Statements (unaudited)

Item 1. Condensed Consolidated Financial Statements (unaudited) 8 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 8 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 9 Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 10 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 11 Notes to Condensed Consolidated Financial Statements 12

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 33

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 44

Controls and Procedures

Item 4. Controls and Procedures 44 PART II. OTHER INFORMATION 44

Legal Proceedings

Item 1. Legal Proceedings 44

Risk Factors

Item 1A. Risk Factors 44

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 47

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 47

Other Information

Item 5. Other Information 47

Exhibits

Item 6 Exhibits 48 2 Glossary of Terms The following terms or acronyms used in this Quarterly Report on Form 10-Q are defined below: Term or Acronym Definition 2024 10-K 2024 Annual Report on Form 10-K filed with SEC on February 25, 2025 2028 Unsecured Notes 7.000% senior unsecured notes due 2028 issued by LNWI 2029 Unsecured Notes 7.250% senior unsecured notes due 2029 issued by LNWI 2031 Unsecured Notes 7.500% senior unsecured notes due 2031 issued by LNWI 2033 Unsecured Notes 6.250% senior unsecured notes due 2033 issued by LNWI AEBITDA Adjusted EBITDA, our primary performance measure of profit or loss for our business segments ASC Accounting Standards Codification ASX Australian Securities Exchange CMS casino-management system D&A depreciation, amortization and impairments (excluding goodwill) Exchange Act Securities Exchange Act of 1934, as amended FASB Financial Accounting Standards Board Grover Grover Gaming charitable business acquired on May 16, 2025 KPIs Key Performance Indicators L&W Light & Wonder, Inc. LBO licensed betting office LNWI Light and Wonder International, Inc., a wholly-owned subsidiary of L&W and successor to Scientific Games International, Inc. LNWI Credit Agreement That certain credit agreement, dated as of April 14, 2022, among LNWI, as the borrower, L&W, as a guarantor, the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Collateral Agent and Swingline Lender, BofA Securities, Inc., BNP Paribas Securities Corp., Deutsche Bank Securities Inc., Fifth Third Bank, National Association, Barclays Bank PLC, Citizens Bank, N.A., Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc., Royal Bank of Canada, Truist Securities, Inc., Credit Suisse Loan Funding LLC and Macquarie Capital (USA) Inc. as Lead Arrangers and Joint Bookrunners, as amended, restated, amended and restated, supplemented or otherwise modified from time to time LNWI Credit Agreement A That cert

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Throughout this Quarterly Report on Form 10-Q, we make "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as "may," "will," "estimate," "intend," "plan," "continue," "believe," "expect," "anticipate," "target," "should," "could," "potential," "opportunity," "goal," or similar terminology. The forward-looking statements contained in this Quarterly Report on Form 10-Q are generally located in the material set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" but may be found in other locations as well. These statements are based upon management's current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other factors, including, among other things: our inability to successfully execute our strategy; slow growth of new gaming jurisdictions, slow addition of casinos in existing jurisdictions and declines in the replacement cycle of gaming machines; risks relating to foreign operations, including anti-corruption laws, fluctuations in currency rates, restrictions on the payment of dividends from earnings, restrictions on the import of products and financial instability; difficulty predicting what impact new or increased tariffs imposed by and other trade actions taken by the U.S. and foreign jurisdictions could have on our business; U.S. and international economic and industry conditions, including changes in consumer sentiment and discretionary spending, increases in benchmark interest rates

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Condensed Consolidated Financial Statements (unaudited)

Item 1. Condensed Consolidated Financial Statements (unaudited) LIGHT & WONDER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Revenue: Services $ 601 $ 530 $ 1,694 $ 1,573 Products 240 287 730 818 Total revenue 841 817 2,424 2,391 Operating expenses: Cost of services (1) 112 112 336 334 Cost of products (1) 105 134 311 366 Selling, general and administrative 219 220 644 657 Research and development 62 66 192 194 Depreciation, amortization and impairments 108 90 298 264 Restructuring and other 6 36 43 76 Operating income 229 159 600 500 Other (expense) income: Interest expense ( 84 ) ( 73 ) ( 229 ) ( 223 ) Loss on debt financing transactions ( 4 ) ( 2 ) ( 5 ) ( 2 ) Other (expense) income, net ( 2 ) ( 3 ) 1 14 Total other expense, net ( 90 ) ( 78 ) ( 233 ) ( 211 ) Net income before income taxes 139 81 367 289 Income tax expense ( 25 ) ( 17 ) ( 76 ) ( 61 ) Net income $ 114 $ 64 $ 291 $ 228 Basic and diluted net income per share: Basic $ 1.37 $ 0.72 $ 3.45 $ 2.55 Diluted $ 1.34 $ 0.71 $ 3.39 $ 2.49 Weighted average number of shares used in per share calculations: Basic shares 84 89 84 90 Diluted shares 85 91 86 92 (1) Excludes D&A. See accompanying notes to condensed consolidated financial statements. 8 LIGHT & WONDER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net income $ 114 $ 64 $ 291 $ 228 Other comprehensive income (loss): Foreign currency translation gain, net of tax 8 60 131 30 Derivative financial instruments unrealized loss, net of tax ( 2 ) ( 14 ) ( 10 ) ( 8 ) Total other comprehensive income 6 46 121 22 Total comprehensive income $ 120 $ 110 $ 412 $ 250 See accompanying notes to condensed consolidated financial statements. 9 LIGHT

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