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Light & Wonder (L&W) has reiterated its earnings guidance for the year despite a federal judge’s decision to grant rival Aristocrat a preliminary injunction halting sales of the company’s popular Dragon Train slot machine.
U.S. District Court of Nevada Judge Gloria Navarro ruled Monday (September 23) that Aristocrat is “extremely likely” to succeed in demonstrating L&W misappropriated trade secrets in developing the Dragon Train game.
In her ruling, Navarro enjoined L&W from “any continued or planned sale, leasing, or other commercialization of Dragon Train”.
The decision will reportedly prevent L&W from displaying the dragon-themed slot machine at next month's Global Gaming Expo (G2E) trade show in Las Vegas, pending appeals.
“We respectfully disagree with the judge’s decision and will promptly file an appeal,” L&W said in a statement late on Monday. “We will continue to vigorously defend against Aristocrat’s claims, including presenting our defenses to a jury at trial.”
For its part, Aristocrat applauded Navarro’s decision, which recognized that by allegedly misappropriating trade secrets relating to Aristocrat’s Dragon Link and Lightning Link games, L&W “was able to develop Dragon Train without investing the equivalent time and money.”
In granting the preliminary injunction, Navarro noted “the public interest in protecting trade secrets and preventing competitors from receiving an unfair advantage.”
“We are extremely pleased with the court’s decision,” said Matthew Primmer, chief product officer of Aristocrat. “This ruling underscores the value of our intellectual property and reaffirms our commitment to protecting the integrity of our business.”
Primmer also stated that Aristocrat will continue pursuing its case against L&W in Nevada and will seek further legal remedies.
In a related legal action, the Federal Court of Australia earlier this year granted Aristocrat pre-suit discovery against L&W and Aristocrat continues to consider its legal options in Australia.
Aristocrat filed the lawsuit on February 26 against L&W and two subsidiaries, LNW Gaming Inc. and SciPlay Corp., accusing them of trade secret misappropriation, copyright infringement, trade dress infringement and deceptive trade practices.
Aristocrat claimed two of its former game developers, who joined L&W in 2021, aided the company in creating the Jewel of the Dragon and Dragon Train games using intellectual property that was developed for Dragon Link and Lighting Link, according to the Las Vegas Review-Journal.
L&W filed a response arguing that Aristocrat’s claims had no merit.
In its statement released late Monday, L&W reaffirmed its 2025 guidance of $1.4bn in consolidated adjusted EBITDA, saying it expected continued strong growth across all lines of its business in spite of the ruling regarding Dragon Train.
“Our pre-ruling estimate of 2025 consolidated AEBITDA for Dragon Train was less than 5 percent of $1.4bn,” L&W said in the statement. “We have a diversified portfolio of successful game franchises that are driving our strong performance and growth, of which Dragon Train is only one.”
Still, shares of L&W lost $21.97, or 19.50 percent, to close Tuesday at $90.71 on the Nasdaq market.
Despite the double-digit decline in the share price, Barry Jonas, an analyst with Truist Securities, said he was encouraged by L&W reiterating its 2025 AEBITDA guidance.
“We expect L&W to leverage its diverse portfolio of successful gaming content to offset the loss,” Jonas wrote Tuesday in a report for investors. “We don’t expect L&W to remove any current placements until they receive further clarification.”
Chad Beynon, an analyst with Macquarie Research, estimated L&W had installed 2,000 Dragon Trains games across various gaming properties, generating around $30m-plus of AEBITDA and outright sales that generate about $40m of EBITDA for L&W.
“If successful at trial, we think Aristocrat will want Dragon Train to be removed, rather than receiving a royalty,” Beynon wrote in a research note. “Further to litigation with Aristocrat, L&W also faces litigation from Evolution, with allegations relating to copying math files and payout structures for table games.”
L&W plans to file a motion with the federal court for a clarification, with the expectation of a response in the next couple of weeks. The company then expects to file an appeal once clarification is received, Jonas wrote.
“It's unclear what the impact would be on previously sold games (mostly in Australia) given they are no longer L&W property,” Jonas wrote. “For now, we see this setback as isolated and manageable.”
