Light & Wonder Generates $6.6B By Selling Businesses In Q3

Written By J.R. Duren on November 14, 2022
Q3 earnings for Light & Wonder reflect lower debt ratio

During its Q3 earnings call this month Light & Wonder, the gaming manufacturer known as Scientific Games, detailed the closing sales of two US gambling businesses.

Those businesses are the sports betting arm OpenBet and its lottery business. The sales freed up cash to help pay down debt and lower the company’s leverage, according to the earnings call.

OpenBet sell-off brought in $700 million in cash

Light & Wonder announced on Sept. 27, 2021, it had entered into an agreement with Endeavor to sell its sports betting business, OpenBet.

The asking price was $1.2 billion, and Light & Wonder eventually agreed to $700 million in cash and $50 million in Endeavor stock. Light & Wonder CEO Matthew Wilson said during the call:

“Turning to this quarter, we closed the sale of the sports Betting business, which marked the final step to streamline our organization and further strengthen our balance sheet enabling us to achieve a net debt leverage ratio of 3.1x at the end of the third quarter, squarely within our target range.”

The reference to net debt leverage ratio is an important one. The company’s goal for its post-sale debt leverage was 2.5x-3.5x. In other words, the company wanted to lower the ratio of its earnings before interest and taxes to the interest it pays on its long-term debts.

The sale of its sports betting arm helped lower the company’s debt ratio. However, the sale of its lottery arm was the main driver behind the drop in debt ratio.

Lottery business sale brings in $5.8 billion

Earlier this year, Light & Wonder completed the sale of its lottery business to Brookfield Business Partners.

The company sold the business for $5.8 billion. After-tax proceeds from the sale were around $5.0 billion. Then-CEO Barry Cottle said in a statement:

“The lottery business sale closing is a significant step towards streamlining our portfolio and strengthening our balance sheet as we execute on our strategy to transform our business with a singular focus on building great games and franchises to entertain our players wherever and whenever they want to play.”

The two sales enabled the company “to make swift and significant progress transforming our balance sheet,” EVP Constance James said. She noted that the company was able to reduce its debt outstanding by $4.8 billion, or 55% since the beginning of the year.

The debt reduction lowered the company’s debt leverage ratio to 3.1x. This figure is within the range of Light & Wonder’s goal of 2.5x-3.5x.

Research a top priority amid a lighter debt load

With its debt reduced and its balanced sheet strengthen, Light & Wonder plans to invest in research and development.

“Our balance sheet is a competitive advantage,” James said. “We are able to invest in our R&D engine and key growth initiatives, while at the same time, servicing our debt maturities, all from our cash flows regardless of the economic cycle.

The goal of this push, James said, is to drive return on investment and boost shareholder value.

Photo by Sergey Nivens/Shutterstock/PlayUSA
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J.R. Duren

J.R. Duren has covered the gambling beats for more than a dozen states for Catena Media since 2015. His past reporting experience includes two years at the Villages Daily Sun, and he is a first-place winner at the Florida Press Club Excellence in Journalism Contest.

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