Light & Wonder turns to Mexico to mitigate US tariffs
US machine and games supplier Light & Wonder told analysts on Wednesday that it was considering transferring part of its supply chain to Mexico, to leverage its trade deal with the US, as part of its plans to mitigate US tariffs.
CEO Matt Wilson said the company was “dynamically reconfiguring [its] supply chain to circumvent the policies that are in place. You know, bringing product through Mexico is one great example of that.”
In February President Donald Trump threatened to impose tariffs on incoming trade to the US. Financial markets buckled following the initial announcement and financial institutions warned the measure could impact inflation and drive unemployment in the US.
In April, the implementation of tariffs was paused for 90 days, leaving many businesses across the globe treading water and preparing for the worst.
As a leading supplier of casino gaming machines in the US, Light & Wonder could be heavily impacted by the introduction of tariffs.
In Q1, Light & Wonder recorded a 9% year-over-year growth in its North American installed base, which grew to 34,501 units. This marked an increase of 497 units compared to the last quarter.
CEO says current tariffs situation is ‘worst case scenario’
CEO Matt Wilson said, during its Q1 earnings call, the current state of the situation is what he would consider the “worst case scenario”. However, he believes the market environment will improve as negotiations take place with various countries.
“While this industry has proven to be resilient time after time, we are not immune to ripple effects from operators and the end consumers, should we see a long-term structural shift in policies resulting in a softer macroeconomic environment,” Wilson said.
Light & Wonder operates a number of business lines and product ranges, meaning it is impacted to “varying degrees” by changing policies, which have been fluid.
“Dynamic situation, to say the least – changes by the day or the hour or the tweet,” Light & Wonder’s CFO Oliver Chow told investors.
The company has sought to mitigate the impact of the tariffs by enhancing its supply chain and operational efficiency. It has been onshoring production and has begun sourcing some of its supply chain in regions such as Mexico, which is part of a United States-Mexico-Canada trade agreement that has had tariffs paused, for now.
“If you dial back three or four weeks when the policies first came out, it was a little bit scorched earth in terms of getting product into the US out of the Asian supply base,” Chow noted.
Light & Wonder tariff mitigation
In order to stay ahead of the tariff impact, Light & Wonder has pulled inventory forward so the company has multiple quarters of stock and supplies in place that have not been impacted by the tariffs.
At the start of the tariff threat, in a similar approach, phone manufacturer Apple reportedly airlifted 600 tonnes of iPhones to the US to beat the incoming tariffs.
Light & Wonder noted that the supply chain for manufacturers in the gaming sector is homogenised to a certain extent. “There’s not a huge amount of suppliers that supply the types of things that we need to build slot machines,” Wilson said.
CFO Chow told investors that tariffs are a “burden” impacting the entire industry. He noted suppliers must step up to the plate and shoulder the burden of those increased tariffs. However, he added that the group’s experience during the Covid pandemic showed that costs can be passed on to customers to some level.
Chow said the economy did not mirror the performance of the gaming sector and a key metric to follow is GGR, as that is the “fuel that drives the engine of the gaming ecosystem”.
“[GGR is] the number to look for as a potential catalyst either to the upside or the downside. We’re watching it like hawks ourselves.
“We’re not going to be knee-jerk in this, right. We want to make sure that we’re not overacting, that we understand where this all settles.”
Light & Wonder pauses ASX listing plans
Elsewhere, the operator has paused plans to initiate a sole or dual primary listing on the Australian Stock Exchange (ASX).
In February, the company said it was engaged with advisers Jarden Australia and Goldman Sachs to look at a transition from the NASDAQ exchange. As of 1pm GMT Light and Wonder is trading on the NASDAQ at $93.63 per share.
However, given the current global uncertainty across financial markets, Light & Wonder indicated to investors this week it would be slowing its approach and considerations for the ASX.
“I would say given everything else that’s happening in the world, we know there’s a lot on investors’ minds, whether it’s the macro or tariffs or any number of things. And so, yeah, in times of uncertainty, it’s probably worth taking the foot off the accelerator with this initiative for a period of time,” CEO Wilson told investors.
Wilson added the company believes the listing is the right thing to do in terms of strategy, but Light & Wonder is being “thoughtful” about the pace at which it executes the move.
Group revenue up 2% in Light & Wonder Q1 results
Turning to its results, Light & Wonder reported a 2% rise in group revenue to £774 million in the first quarter.
The group’s net income for the period was $82 million, which was stable compared to Q1 2024.
For the three-month period ended 31 March, gaming revenue came in at $495 million, up 4% year-on-year. The group’s iGaming revenue increased by 4% to $77 million year-on-year.