Scientific Games Stock

Light & Wonder, Inc. (L&W) operates as a cross-platform global games company with a focus on content and digital markets headquartered in Las Vegas, Nevada.

The company’s portfolio of revenue-generating activities primarily includes supplying game content and gaming machines, CMSs and table game products and services to licensed gaming entities; providing social casino and other mobile games, including casual gaming, to retail customers; and providing a comprehensive suite of digital gaming content, distribution platforms, player account management systems, as well as various other iGaming content and services.

On October 23, 2023, the company acquired the remaining approximately 17% equity interest in SciPlay not already owned by the company pursuant to a merger (the ‘SciPlay Merger’), after which SciPlay ceased to be publicly traded and became a wholly-owned subsidiary of L&W.

The company provides its games, gaming machines, gaming systems, table products and related products and services in legal gaming jurisdictions worldwide. The manufacture, distribution, provision and operation of the company’s gaming products and services is subject to regulation and approval by various city, county, state, provincial, federal, tribal and foreign agencies.

The company holds all of the licenses and permits necessary to conduct the company’s business. The company is authorized to manufacture, sell, lease or operate the company’s gaming products and services in approximately 457 jurisdictions worldwide (including jurisdictions that do not require licensing), including approximately 173 international gaming jurisdictions.

Strategy

The company strives to provide high quality products and services to its customers across all of the company’s business segments. After the completion of the company’s strategic review in 2021, the company sets forth its strategy to become a leading cross-platform global games company with a focus on content and digital markets. The company established a strategic roadmap to drive long-term value that consists of growing the company’s market share and leveraging the company’s differentiated position; and driving sustainable growth. The company is focused on the following, supporting the company’s strategic roadmap:

Creating great content and franchises fully cross-platform and enabling a seamless player experience — The company is singularly focused on creating great games and evergreen franchises that can be made available to players on any platform they want to play and enabling systems and technology for the company’s players and customers.

Expanding in high-return markets — The company is investing organically and inorganically in the company’s core markets and strategic adjacencies that generate strong long-term cash-based returns.

Segments

The company reports its results of operations in three business segments—Gaming, SciPlay and iGaming—representing the company’s different products and services.

Gaming Segment

The company’s products are installed in all of the major regulated U.S. gaming jurisdictions and authorized in approximately 173 international gaming jurisdictions. Growth of gaming in land-based venues is driven by the opening of new casinos in both new and existing jurisdictions and the expansion of existing casinos. In addition, the land-based gaming business is significantly impacted by the rate at which casinos and other gaming operators replace their gaming machines, which depends on a number of factors, including their capital budgets. Virtually all sectors of the gaming industry are impacted by changes in economic conditions that impact players’ disposable incomes.

A substantial portion of the company’s U.K. gaming business benefits from a contract with the large U.K. bookmaker Entain PLC, which represents a significant portion of the company’s U.K. LBO server-based gaming business.

Competition

The company competes primarily with Ainsworth Game Technology Ltd., Aristocrat Leisure Ltd., (‘Aristocrat’), Aruze Gaming America, Inc., Bluberi Gaming USA, Inc., Everi Games, Inc., Incredible Technologies, Inc., International Game Technology (‘IGT’) (a subsidiary of International Game Technology PLC), Inspired Entertainment Inc., Konami Digital Entertainment, Inc. (‘Konami’), the Novomatic Group of Companies, Interblock Gaming, and PlayAGS, Inc. (‘AGS’).

The company’s principal competitors in CMSs include Aristocrat, IGT and Konami.

The company also competes with non-PTGs such as blackjack and baccarat and several companies that primarily develop and license PTGs such as AGS, Galaxy Gaming, Inc. and Masque Publishing, Inc.

SciPlay Segment

SciPlay is a leading developer and publisher of digital games on mobile and web platforms. SciPlay operates primarily in the social gaming market, which is characterized by gameplay online or on mobile devices that is social, competitive and self-directed in pace and session length. SciPlay also operates in the hyper-casual space, which is characterized by simpler core loops and more repetitive gameplay than casual games. SciPlay generates a substantial portion of its revenue from in-app purchases in the form of virtual coins, chips and cards, which players can use to play slot games, table games or bingo games. Players who install SciPlay’s games typically receive free coins, chips or cards upon the initial launch of the game and additional free coins, chips or cards at specific time intervals. Players may exhaust the coins, chips or cards that they receive for free and may choose to purchase additional coins, chips or cards in order to extend their time of game play. Once obtained, coins, chips and cards (either free or purchased) cannot be redeemed for cash nor exchanged for anything other than game play within SciPlay’s apps. SciPlay generates additional revenue through advertising arrangements in SciPlay’s hyper-casual games. Players who install SciPlay’s hyper-casual games receive free, unlimited gameplay that requires viewing of periodic in-game advertisements.

SciPlay offers a variety of social casino games, including JACKPOT PARTY Casino, GOLD FISH Casino, QUICK HIT Slots, 88 FORTUNES Slots, MONOPOLY Slots and HOT SHOT CASINO. SciPlay continues to pursue its strategy of expanding into the online and mobile games market. Casual game titles include BINGO SHOWDOWN and Backgammon Live, as well as other titles in the hyper-casual space, including games, such as CANDY CHALLENGE 3D, BOSS LIFE and DEEP CLEAN INC. 3D. SciPlay continually develops and tests various new games. SciPlay’s social casino games typically include slots-style game play and occasionally include table games-style game play, while its casual games blend solitaire-style or bingo game play with adventure game features, and its hyper-casual games include many simple core loop mechanics. All of SciPlay’s games are offered and played across multiple platforms, including APPLE, GOOGLE, FACEBOOK, AMAZON, and MICROSOFT. SciPlay launched a proprietary in-app purchase platform during 2023, with the intention of improving players’ experience and reducing costs of revenue given the lower payment processing fees and other related expenses for in-app purchases made through the proprietary platform, as compared to the platform fee charged by third-party platforms. Revenue generated via the proprietary platform is not material.

In addition to original game content, SciPlay’s content library includes recognizable game content across the company’s other platforms within Gaming and iGaming. This content allows players who like playing land-based game content to enjoy some of those same titles in SciPlay’s free-to-play games. SciPlay has access to a library of more than 1,500 iconic casino titles, including titles and content from third-party licensed brands, such as MONOPOLY and JAMES BOND. SciPlay’s access to this content, coupled with years of experience developing in-house content, uniquely positions SciPlay to create compelling digital games.

A number of trends and opportunities are driving significant changes in digital gaming, which are causing growth in the online and mobile games market and providing opportunities for SciPlay to grow the company’s social casino games and expand into other areas of the online and mobile games market, such as Digital gaming is an engaging form of entertainment; mobile devices are a leading medium to consume content, such as games; increasing number of players with the emergence of casual games; scale is increasingly strategic in order to succeed in mobile gaming; social casino gaming is an attractive market within digital gaming; and additional market opportunities within the broader mobile gaming landscape.

Competition

SciPlay’s primary social casino game competitors include Playtika, Playstudios, Product Madness/Big Fish Games (subsidiaries of Aristocrat), DoubleU Games Co., Ltd/Double Down Interactive, GSN Games/Bash Gaming (subsidiaries of Scopely, Inc.), AppLovin Corporation and Huuuge Games. SciPlay’s competitors in the broader social game market include Activision Blizzard, Electronic Arts, Kabam, Take-Two Interactive, Tencent Holdings, and Rovio.

iGaming Segment

The company’s iGaming business segment provides a comprehensive suite of digital gaming content, distribution platforms, player account management systems, as well as various other iGaming content and services. The majority of the company’s revenue is derived from casino-style game content, including a wide variety of internally developed and branded games, as well as popular third-party provider games. These games are made available to iGaming operators via content aggregation platforms, including the company’s Open Gaming System network that connects players with studios and operators globally, remote gaming servers, and various other platforms. The company also provides its Open Platform System (‘OPS’), a player account management system, which offers a wide range of reporting and administrative functions and tools providing operators full control over all areas of digital gaming operations. Generally, the company hosts the play of its game content, which is integrated with the online casino operators’ websites. The company also offers live casino services and is positioned to do so in more jurisdictions that may authorize online gaming in the future.

Competition

The company’s primary real-money online casino games competitors include Evolution Gaming, Games Global, IGT, and Playtech.

Intellectual Property

Certain of the company’s games are based on popular brands licensed from third parties, such as Hasbro, Inc.; Warner Bros. Consumer Products Inc.; ABG EPE IP LLC, Elvis Presley Enterprises, LLC.; Danjaq, LLC and Metro-Goldwyn-Mayer; John R. Cash Revocable Trust; Universal Studios, parent company NBC Universal Film and Entertainment; and Netflix, Inc.

Seasonality

Sales of the company’s gaming machines to casinos are generally strongest in the second half of the year (year ended December 2023) and slowest in the first half of the year, while revenue from the company’s Participation gaming machines is generally highest in the spring and summer. Player activity for SciPlay is generally slower in the second and third quarters of the year, particularly during the summer months. Player activity for the company’s iGaming business, specifically digital casino operations, is generally slower in the third quarter during the summer months and is generally higher in the fourth quarter.

Government Regulation

SciPlay is subject to foreign and domestic laws and regulations that affect companies operating online, including over the internet and mobile networks, many of which are still evolving. SciPlay is also subject to federal, state and foreign laws related to the privacy and protection of player data. Such regulations, such as the General Data Protection Regulation (‘GDPR’) from the European Union (‘EU’), the California Consumer Privacy Act and the California Privacy Rights Act are recent, untested laws and regulations that have affect SciPlay’s operations and business.

History

The company was incorporated in the state of Delaware in 1984. It was formerly known as Scientific Games Corporation and changed its name to Light & Wonder, Inc. in 2022.