Sweepstakes challenges temper Light & Wonder’s growth

Light & Wonder’s latest quarter showed growth in its casino content business, but its social-gaming arm SciPlay is feeling pressure as sweepstakes competition heats up in the US.

In the second quarter, SciPlay revenue fell 9% year-on-year to $182m. CEO Matt Wilson linked the dip to heightened competition among sweepstakes companies that’s pushing up player acquisition costs.

Company leadership said it still expects SciPlay to return to growth. The view inside the business is that a wave of legal action against sweepstakes providers in states across the US could start to shift the environment back in SciPlay’s favor, potentially easing those acquisition costs. The company also reiterated that SciPlay remains “an integral part of the business,” including as a complementary channel for A/B testing and giving its franchises exposure to a broader audience.

Outside social, Light & Wonder posted year-on-year gains in its other segments: land-based gaming revenue rose 5% to $554m, and online casino revenue increased 14% to $92m during Q2.

Looking ahead, executives also flagged a separate headwind in the UK: the government’s remote gaming duty increase from 21% to 40%, which took effect in April. CFO Oliver Chow said the change will weigh on earnings through the second half of the year, adding that the company is working with customers and partners on how to move forward in the new regime, with a focus on first-party content proliferation and expanding its partner network. Chow said the business expects to “lap” the hike next year and return to its “requisite growth rates.”

Early reporting from other companies has pointed in different directions on how the higher UK tax is landing: FDJ United called the UK a continued challenge as it navigates the hike, while Super Group reported a 34% year-on-year increase in UK revenue in Q2 and spoke about opportunities to acquire users as others pull back.