The CEO of Light & Wonder says recent moves by the company to significantly reduce debt and deleverage has the global gaming giant well positioned to achieve its goal of US$1.4 billion in Adjusted EBITDA by 2025.
Matt Wilson, who took over the top job at Light & Wonder in September, told CommSecTV – a media arm of Australian online stockbroking firm CommSec – that the company’s decision to split its gaming, lottery and sports betting brands into separate businesses in late 2021 has provided far greater ability to invest into its growth pathways.
In particular, Wilson noted that the company, previously known as Scientific Games, had at one stage during the COVID-19 pandemic been leveraged at 10.5x but had since reduced that to 3.1x thanks to the US$7 billion it earned from the sale of those lottery and sports betting assets. As a result, Light & Wonder is aiming to increase Adjusted EBITDA from US$913 million in 2022 to US$1.4 billion within the next three years.
“We feel a really high level of conviction about getting there,” Wilson said.
“The question you would ask is, ‘Why do you feel like you can do that?’ For us it’s really about the fact that we had the shackles on the business back in the Scientific Games era. With all that leverage, every dollar of free cash flow went to servicing our debt and so we were underinvesting in R&D (research and development), underinvesting in capex, underinvesting in user acquisition costs in our social casino business.
“Now we’re out from underneath that debt burden so we’re able to invest behind our ambitions. We’ve expanded our R&D as a percentage of revenue from around the 7% range to 10% while protecting healthy margins and that just gives us a lot of dry powder to kind of invest behind our ambitions. We see that driving growth across all three businesses.”
Wilson also believes achieving its 2025 target will help Light & Wonder achieve a stock price that is “magnitudes higher than it is right now.”
“We feel like there’s a dislocation in how the stock is priced and so we’ve been active in the market with the share buyback – buying back our own stock and signalling to the market that we believe there’s upside from here,” he explained.
Wilson’s appearance in CommSec’s Sydney studio formed part of a visit to further explore a recently announced secondary listing on the Australian Securities Exchange.
Elaborating further on this secondary listing, which comes in addition to its current NASDAQ listing in the US, Wilson described the move as the “next obvious milestone in our strategic transformation” and a reflection of Light & Wonder’s growing presence in the Australian market.
“We have a business here that’s growing really nicely,” he said. “We’ve typically been a 9% share player in Australia but our Q1 results saw us ship 22% of the market so growing nicely. We have lots of customers here, we have a huge amount of employees in Australia and we want to add to that over time.
“I think this story about Australians punching above their weight in the gambling industry is completely true. If you go to any market around the globe you’ll hear an Aussie accent, whether it’s on the operator side or the supply side, and the same is true from investors.
“Investors down here have done really well out of the gaming industry and many of them have an affinity with [fellow gaming supplier] Aristocrat. They are familiar with the [Light & Wonder] management team and its chairman (former Aristocrat CEO Jamie Odell) and so this is just another great opportunity to bring a new investable vehicle to market for investors exploring growth opportunities globally as well as in Australia.”
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