Mexico is among the countries Light & Wonder will turn to in an effort to mitigate the economic backlash of Donald Trump’s global tariffs.
The US-based game supplier told analysts on Wednesday (7 May) that it was considering shifting part of its supply chain to Mexico to take advantage of the USMCA, a free trade agreement that aims to create more balanced and reciprocal trade between the US, Canada and Mexico.
“We have been executing the longer-term plans to enhance our supply chain and operational efficiency,” said Oliver Chow, Light & Wonder’s Chief Financial Officer. “This ranges from onshoring of production, relocation of sourcing and utilisation of agreements such as the USMCA.
“As we progress forward, we will remain nimble and reactive to the environment and continue consistent reevaluation of our supply chain and operational business.”
Tariffs have been top of the list of priorities for Donald Trump since he returned to the White House.
In February, the US President announced plans to place “reciprocal tariffs” on countries worldwide to match tax rates that countries worldwide charge on imports, causing economists to warn of chaos for global business.
Since then, US and internationally levied tariffs on goods are continuing to be enacted and redacted, as the rest of the world retaliates against the taxes or attempts to work alongside the US economy – such as the UK, which this week inked a trade deal with the US.
As a result, companies such as Light and Wonder that rely on a global supply chain to manufacture their products are left in limbo.
Already, gaming has become embroiled in the tariff wars. Last month, the Macau-based supplier LT Game prohibited US sales due to rates, some in excess of 100%, making it no longer financially viable to compete in the US market.
Meanwhile, in Canada, the Alberta Gaming & Liquor Commission, alongside other provinces such as Saskatchewan and British Columbia, suspended the purchase of US gaming terminals.
During the earnings call, Chow said that the current situation is the “worst case scenario”. However, as the world reacts to Trump’s policies, the situation will improve as negotiations take place among various countries and the market calms.
Light & Wonder CEO Matt Wilson added: “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 many of the Asian supply bases.
“But over time, we found ways to mitigate that through reconfiguring the supply chain and also just, you know, with some of the pauses that we’ve seen on tariffs coming through.”
To try to mitigate the tariff’s immediate impact, Light & Wonder has pulled stock forward, meaning that it will have “multiple quarters of inventory” that isn’t affected from a tariff perspective.
Looking ahead, Chow also noted that the industry as a whole has a largely “homogenised” supply chain given its specialist nature, and he called on the said suppliers to step up and “shoulder the burden” of the added costs.
However, he also conceded that, given the company’s experience during the COVID-19 pandemic, costs could be passed on to customers to some level.
Phil Bernard, Vice President of Eilers & Krejick Gaming, told iGaming Expert that given the uncertain economic situation, digesting the exact costs of the tariffs for the gaming sector is a complex task.
Although he predicted a rise in cost for certain components, such as electronics like chips and screens, Bernard expects any cost increases to be shared, meaning margins could only be “impacted modestly”.
However, he also noted that the real impact could be felt by the consumer as rising costs and slowing growth directly impact the pockets of players.
He said: “Gaming spend is a discretionary item, it is directly tied to the health of the consumer. If the economy slows down, gaming spend is likely to be impacted. The market is generally healthy right now, but the recession risk has risen [though it’s not guaranteed].
Breaking down the company’s Q1 results, Light & Wonder reported revenue of $774m, up 2.4% year-on-year, but below the $809.2m estimated by analysts.
Consolidated EBITDA grew by 11% YoY to $311m compared to $281m during the same period last year. EBITDA margin also grew by 300 basis points to 40%.
The group’s net income for the period was $82m, which was stable compared to Q1 2024.
By sector, gaming revenue was $495m, up 4% YoY, while iGaming revenue also increased by 4%, rising to $77m. However, revenue from its SciPlay business dropped by 2% to $202m.
On the results, Chow said: “Our solid performance continues to be underpinned by a focus on streamlining and optimising our business to enhance margins as reflected in the quarter across the three business units and corporate functions.”
The company has reaffirmed its commitment to a $1.4bn 2025 EBITDA target. This figure does not include the figures from its $850m Grover charitable gaming acquisition.
On the deal, Wilson said: “It’s a nice, fast-growing recurring revenue business that’ll start to make a meaningful contribution to Light and Wonder over the remainder of the year.”
