By Antonina Tupikova · Founder, iGaming Times3 min read
Light & Wonder has made de-leveraging its balance sheet the company's overriding priority after its second-quarter earnings call, with CFO Oliver Chow setting a target of three times cash flow by mid-2027. The shift signals a strategic recalibration for the gaming supplier after years of acquisition-driven growth, and puts share buybacks firmly on the back burner for the remainder of 2026.
Light & Wonder used its second-quarter 2026 earnings call, held on Tuesday 4 August, to reframe its strategic priorities around balance-sheet repair. Chief Financial Officer Oliver Chow presented a debt-reduction roadmap targeting a leverage ratio of three times cash flow by mid-2027, a level consistent with investment-grade credit ratings. Share buybacks, previously a component of the company's capital-allocation programme, will become a lower priority over the remainder of 2026 as the supplier concentrates cash on debt repayment.
The trajectory Chow outlined is substantial. According to the company's own data presented during the call, Light & Wonder's net debt stood at 10.5 times cash flow as recently as 2020, a level reflecting the company's acquisition-heavy growth strategy in the years surrounding its rebrand from Scientific Games. That ratio has since fallen to 3.4 times, and the mid-2027 target of three times would represent the culmination of a multi-year deleveraging effort.
CEO Matt Wilson framed the overall Q2 performance as consistent with recent trends. "We delivered another quarter of strong financial performance," he said at the outset of the call. "Our focus is now to rapidly de-lever our balance sheet." Wilson highlighted that recurring revenue has grown to 71% of total company revenue, a proportion he argued would make earnings more predictable and give the de-leveraging programme a more stable foundation. Chow reaffirmed guidance of mid- to high-single-digit growth in cash flow for the full year, noting the outlook holds even accounting for US tariff pressures.
Light & Wonder's core North American gaming operations continued to perform. The company's installed base in the region grew 5% year on year, and the quarter marked the 24th consecutive period of sales growth in that geography. Revenue per North American unit also increased 6%. Subsidiary Grover Gaming added 1,549 machines over the year, bringing its United States total to 12,550, with charitable game Tank Blast reported to have generated the highest revenue in its first 14 days of any comparable game in Indiana history. Minnesota and Maryland were cited as targets for further expansion investment.
The two softer areas were SciPlay and gaming systems. SciPlay, the company's social-casino arm, saw revenue fall 9%, which Wilson attributed in part to competitive pressure from sweepstakes-casino operators, noting that their presence has increased customer-acquisition costs. However, the division posted a 51% rise in direct-to-consumer revenue and 4% higher revenue per user. Wilson said a multi-stage turnaround process had been initiated and described the subsidiary as integral to the broader business. Chow offered a measured note of optimism, saying the company was "seeing green shoots" in the social-casino sector without declaring the challenge resolved. Gaming-systems sales were also down 16%, a result the company attributed to a difficult comparison with the second quarter of 2025 rather than structural deterioration.
On iGaming, the division produced $92 million in revenue during Q2. Wilson cautioned that the second half of 2026 would see moderation in that segment, driven partly by tax increases in the United Kingdom. Growth in South Africa, and to a lesser degree Brazil and the Philippines, was identified as a partial offset. The impact of UK tax changes on iGaming supplier economics is a theme playing out across the sector, as covered in iGT's reporting on Treasury policy and operator costs.
Wilson also addressed consolidation among US casino operators, downplaying its implications for the supply side. "I don't think it has any major implications for the supply side," he said, arguing that operator management continuity and the need for fresh product on slot floors means suppliers such as Light & Wonder retain their leverage regardless of ownership changes. Analysts tracking M&A dynamics in the sector have been watching related moves closely, including broader Wall Street commentary on supplier exposure to operator consolidation. On artificial intelligence, Wilson declined to elaborate ahead of a planned company presentation on the subject, saying only that Light & Wonder wanted to be "targeted" rather than "busy fools" in its early-stage adoption.
The Shift From 10.5x to 3x Is the Real Story Behind the Headline Figures
The most consequential disclosure from the Q2 call is not the quarterly revenue mix but the debt trajectory. A move from 10.5 times cash flow in 2020 to a target of three times by mid-2027 represents a fundamental change in how Light & Wonder is financed. The earlier leverage level was characteristic of a company funding aggressive inorganic growth, as the rebrand from Scientific Games and associated asset sales and acquisitions reflected. Investment-grade leverage is a different posture entirely: it signals that the company believes its organic growth engine is now sufficient to drive value without further balance-sheet expansion. For operators evaluating supplier relationships, investment-grade credit quality matters: it reduces counterparty risk, improves a supplier's access to capital in a downturn, and supports longer-term investment in product development. The 3.4 times current ratio suggests the target is credible within the stated timeframe, though execution depends on sustaining the cash-flow growth Chow reaffirmed.
Deprioritising Buybacks Reveals a Sequencing Judgment With Long-Term Implications
The decision to place share buybacks behind debt reduction is a sequencing choice that tells investors something specific about management's confidence in the current equity valuation relative to the value of balance-sheet repair. A company that believes its shares are significantly underpriced typically prioritises buybacks; one that believes the structural benefit of investment-grade debt outweighs the near-term return of capital to shareholders makes the opposite call. Light & Wonder is making the latter judgment, at least through the end of 2026. This is not unusual for a business still carrying above-average leverage, but it does redirect capital from an immediate shareholder return toward a medium-term structural improvement. The question for investors is whether the credit-quality benefit, and the lower cost of capital it brings, materialises quickly enough to compensate for the deferral. With the US commercial gaming market posting record revenues and rivals such as Rush Street Interactive also reporting record quarters, the operating environment is supportive, which makes this the right window to pursue the deleveraging target.
SciPlay's Trajectory Deserves More Attention Than the 9% Decline Alone Suggests
The SciPlay headline number will attract scrutiny, but the underlying dynamics are more nuanced. A 51% jump in direct-to-consumer revenue alongside a 9% overall decline indicates a business in transition rather than one in structural decline: the higher-margin channel is growing sharply while the broader market faces pressure from sweepstakes operators. Wilson's reference to state actions against sweepstakes-casino operators is relevant context here. Several US states have moved to restrict or criminalise sweepstakes-casino products in 2025 and 2026, which, if enforcement extends further, would remove a competitive headwind for SciPlay. The multi-stage recovery process Wilson referenced has not yet been detailed publicly, and the absence of specific targets or timelines is the notable gap in the SciPlay update. The green shoots Chow identified are real but, by management's own admission, not yet a basis for confidence. Whether SciPlay can return to growth before the investment-grade deleveraging target is reached will be a secondary but important test of the company's strategic execution over the next 12 months.
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