Light & Wonder CEO Transition Earns Praise From Analyst
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Posted on: August 31, 2022, 02:26h.
Last updated on: August 31, 2022, 03:09h.
Light & Wonder (NASDAQ: LNW) announced late Tuesday that Barry Cottle resigned as chief executive officer and president. He also left the company’s board, with Matt Wilson stepping in as interim CEO — a change that’s drawing praise from some analysts.
In a note to clients, Stifel analyst Jeffrey Stantial says that while the gaming device manufacturer is working with an executive search firm, Wilson is likely to be selected as the permanent CEO.
We are not surprised to see a transition at the CEO level, as Mr. Wilson has been thought to be a candidate for the CEO role since joining LNW in 2020 given his 15+ years of experience with best-in-class competitor Aristocrat, longstanding relationships with key LNW management, Board members, and shareholders, and early work leading and stabilizing LNW’s Gaming business,” wrote the analyst.
He rates the stock “hold.” In announcing the CEO transition, Light & Wonder also reiterated financial forecasts revealed at its investor day in May. The Las Vegas-based company forecast adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) growth of $1.4 billion through 2025, or 15% on a compound annual growth rate (CAGR) basis.
Cottle Oversaw Light & Wonder Makeover
Cottle served as president and CEO of the gaming company since June 2018, engineering significant change in his time at the helm.
Last year, the company announced sales of its OpenBet sports wagering and SG Lottery units — moves that enabled the firm to slash its debt to $4 billion from $8.8 billion. Cottle also oversaw the transition to Light & Wonder from Scientific Games.
As a result of the debt reduction, Light & Wonder reduced its net debt leverage ratio to 3.9x from 6.2x. With the addition of the term loan, the average maturity of the company’s debt rises to 6.4 years. By trimming its net debt leverage to 3.9x, Light & Wonder is within striking distance of its desired range of 2.5x to 3.5x.
“Overall, we remain constructive on the long-term outlook for LNW, as the new highly regarded management team appears well underway on a Gaming turnaround,” added Stantial. “While recent operational changes likely position LNW for long-term success, we continue to believe it could take several quarters for momentum to build.”
Debt Reduction, Digital Focus
Should Wilson shed the interim CEO title and occupy that role on a long-term basis, it’s likely he’ll steer Light & Wonder toward more balance sheet-enhancing efforts. That’s while honing the company’s focus on digital gaming.
The firm recently dropped a bid to acquire SciPlay (NASDAQ: SCPL) outright, but has shown willingness for other dealmaking.
“On the online front, we believe LNW’s synergistic RemainCo assets and portfolio of IP position the company well to take a leading share in the high growth iGaming content opportunity. However, LNW remains in investment mode across both iGaming and SCPL, and we see it unlikely the market ascribes incremental value for long-term growth prospects in the current rising rate environment,” concluded Stantial.
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