Light & Wonder anticipated to reduce EBITDA leverage this year until 2024

November 23, 2023 World iGaming & Gambling

Global gaming supplier Light & Wonder is anticipated to significantly reduce its EBITDA leverage to 3.7x this year and further to 3.3x in 2024, according a study from ratings agency Fitch.

Light & Wonder’s strong cash flow from gaming machines and system operations forms the basis of the forecast. Light & Wonder, Inc. and Light & Wonder International, Inc. have been affirmed by Fitch to have a Long-Term Issuer Default Rating (IDR) of “BB,” which denotes heightened sensitivity to default risk combined with a level of financial and/or commercial flexibility that facilitates meeting financial commitments.

According to the ratings agency, Light & Wonder’s CEO, Matt Wilson, has set an ambitious EBITDA target of $1.4 billion by the end of 2025, up from $913 million in 2022. This comes after the business made the strategic choice to sell its sports betting and lottery businesses in order to lower its financial obligations.

Fitch anticipates that Light & Wonder’s EBITDA leverage will decrease even further throughout the forecast period, reaching 3.3x in 2024. Due to the robust momentum in gaming equipment and systems cash flows as well as consistent digital cash flows, the company’s EBITDA leverage measures are anticipated to stay in the ‘BB’ rating category. The agency emphasized Light & Wonder’s strong anticipated free cash flow production and strong liquidity, maintaining its current grade.

Notwithstanding the recent $485 million purchase of the outstanding 17% equity stake in its social gaming division SciPlay, Fitch sees the transaction as credit positive because of the cash used, the subsidiary’s inclusion in the restricted group, the increased flexibility of the balance sheet, and the continued synergies in game development.

Fitch also took notice of Light & Wonder’s expansion plans in the Asia-Pacific area, especially in Australia, which the company views as a premium market and a leading indicator for bringing successful games to a global audience. Light & Wonder’s recent secondary offering on the Australian Securities Exchange is seen as a step toward the company’s objective of strengthening its market domination in the region—where rival supplier Aristocrat is based. Asia is another location that the company is looking to expand into, with a focus on the Philippines, Singapore, and surrounding areas.

Fitch’s evaluation, taken as a whole, emphasizes Light & Wonder’s solid financial standing, strategic initiatives in significant markets, and growth trajectory—all of which support the company’s favorable credit rating outlook.