Light & Wonder Posts Lower Profit Margins Due To Legal Costs

Light & Wonder reported higher revenue and stronger adjusted free cash flow during Q1 2026. However, net income declined because of legal reserve contingencies and settlements. Revenue for the quarter ending 31 March increased 2% year-on-year to $790 million from $774 million.

However, net income fell 37% to $52 million, or $0.66 per diluted share, compared to $82 million, or $0.94 per diluted share in Q1 2025. The company maintains its pattern of strong growth across various segments, particularly iGaming and gaming operations.

“iGaming delivered another double-digit growth quarter in both revenue and AEBITDA, while SciPlay continued to expand its DTC revenue. Looking ahead, we remain focused on investing in product innovation and talent to further strengthen our recurring revenue model and enhance our global competitive position as we progress toward our 2028 financial targets,” said Matt Wilson, L&W CEO and President.

iGaming remained one of the strongest-performing segments, with revenue increasing 18% year-on-year to $91 million. Adjusted EBITDA rose by 22% to $33 million.

iGaming and gaming operations drive brand growth

Light & Wonder reported a quarterly record of $29.9 billion in wagers processed through its iGaming platform. The company linked this growth to strong momentum in North America, partner network expansion, and first-party gaming content.

Within the Gaming division, revenue increased 3% to $512 million. Gaming operations revenue rose 38% to $239 million, supported by installed base growth and the contribution from Grover. Table products revenue also increased 24% to $63 million.

However, gaming machine sales revenue declined 25% to $156 million. The company said this reflected shipment timing differences for North American and international video lottery terminal deliveries during the previous year. Gaming systems revenue also fell 14% to $54 million because of lower hardware sales. 

Light & Wonder added that its North American premium installed base expanded for the 23rd consecutive quarter, growing by over 2,550 units year-on-year and 650 units sequentially. Grover, which Light & Wonder acquired last year, contributed an additional 660 units during the quarter and ended Q1 with more than 12,200 installed base units, including expansion into Indiana’s recently legal market.

SciPlay revenue declines and weight of legal costs

Revenue from Light & Wonder’s social gaming business, SciPlay, declined 7 per cent year-on-year to $187 million. The decline was mainly linked to weaker player activity within Jackpot Party Casino. 

Direct-to-consumer revenue increased to $50 million and accounted for 27% of total SciPlay revenue during the quarter. Adjusted EBITDA for SciPlay rose 3% to $66 million, while adjusted EBITDA margin improved to 35%.

Light & Wonder said reserve contingencies tied to legacy matters reduced overall profitability during Q1. According to the company, approximately $50 million in legal reserve-related costs negatively impacted the quarter.

The company stated these legal items reduced year-on-year net income growth by approximately 61% and diluted EPS growth by around 67%. Operating cash flow also declined because of litigation settlement payments.

Net cash generated from operating activities fell to $139 million compared to $185 million last year, largely due to $137 million in legal settlement payments. However, adjusted figures showed stronger underlying operational performance.

Adjusted performance improves at Light & Wonder 

Consolidated adjusted EBITDA increased 5% year-on-year to $327 million from $311 million. Adjusted EBITDA margin also improved to 41% compared to 40% last year. Adjusted NPATA reached $115 million compared to $117 million during Q1 2025, while adjusted NPATA per diluted share increased 7% to $1.45.

Adjusted free cash flow rose 86% to $207 million, supported by stronger earnings generation, improved receivable collections, and lower income tax payments. The company ended the quarter with $5.2 billion in debt outstanding and a net debt leverage ratio of 3.5x.

Light & Wonder expects full-year 2026 adjusted EBITDA growth in the mid-to-high single-digit range. But it also warned about tariff-related cost pressures, macroeconomic uncertainty, and higher UK iGaming duties.

The results continued a difficult period for the company’s stock price. Trading on the ASX, Light & Wonder shares have fallen significantly from their six-month high of A$182.50 recorded on 12 January. As of today, the stock trades at A$102.66.

In its released Q1 2026 results, Light & Wonder posted increased revenue and profit margins. However, these figures were negatively impacted by the cost of legal settlements. The company owes its growth to U.S. traction, first-party content, and an expanded partner network.