Light & Wonder Shares Climb After Investor Day Comments

Written By Nicholaus Garcia on May 19, 2022
Light Wonder Has A Stock Hike And Leading Bullish Comments

Newly minted Light & Wonder ($LNW) is getting a much-needed stock boost after the company offered up a bullish outlook moving forward.

At its investor day event, the company forecasts adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) growth of $1.4 billion through 2025. Following the comments, shares of the company rose by more than 8%.

As of writing, shares of $LNW were trading at $50.05.

Light & Wonder planning the next three years

Investor day follows the release of the company’s lackluster first-quarter earnings. Although it reported a net loss of $67 million, CEO Barry Cottle praised the company’s direction.

During its Q1 earnings call, Cottle said:

“With strong revenue growth of 26% in the quarter, we are delivering on our promises to create great content cross-platform while expanding in high-growth digital markets and enabling a seamless player experience.”

Light & Wonder, formally known as Scientific Games, did see gaming revenues increase 45% year-over-year to $355 million.

To raise cash, the company shed its OpenBet sports betting business and its Scientific Games Lottery arm. The result was a complete company transformation.

  • Sold sports betting division to Endeavor Group Holdings Inc. for $1.2 billion
  • Lottery arm purchased for $6 billion by Brookfield Business Partners LP

In a statement, Cottle had this to say:

“This results in an enviable and durable financial profile, which includes double-digit growth, a high mix of recurring revenues and robust margins, all translating into robust cash flow generation.”

Decreasing debt is vital moving forward for Light & Wonder

As with any company, debt plays a significant role when mapping out the next few years.

Back in April, $LNW announced the shedding of its lottery and sports betting division. In doing so, it was able to shrink its debt to $4 billion, down from $8.8 billion.

The debt reduction also lowered its net debt leverage ratio to 3.9x from 6.2x. The company’s desired leverage ratio is 2.5x.

A lower leverage ratio positions the company for a credit upgrade in the future. Higher credit ultimately means Light & Wonder can issue debt with lower interest rates.

In addition, the company is also targeting roughly $10 billion of available capital by 2025, according to an investor presentation.

With lottery and sports betting out of the way, the Las Vegas-based slot machine and table game manufacturer can focus primarily on land-based casinos and iGaming.

“Our unique asset mix and leading market positions provide unparalleled advantages to deliver games fully cross-platform,” Cottle said.

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Nicholaus Garcia

Nick has had stints in Chicago and Washington, D.C., writing about politics, financial markets, and sports betting. He graduated from Texas Tech University and completed his master's degree in journalism at Columbia College Chicago.

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