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