Truist Securities analyst Barry Jonas applauded Light & Wonder’s acquisition of Grover Gaming in a February 19 investor note, “Move over Big Bird.” Jonas opined that Light & Wonder will be enhanced by the purchase “as the company looks to further penetrate adjacent markets.”
Per Jonas’s outlook, Light & Wonder is endeavoring to leverage its existing assets without taking on significant costs in order to expand. “Other opportunities for growth include international markets (e.g. Asia) and continued performance from Social, which is closer to competitor monetization rates,” the analyst wrote.
“Attractive” was Jonas’s description of the 7.1-times-cash flow multiple at which Light & Wonder consummated the deal. He added that said valuation could go lower still if the buyer delivers the $200 million in incentives, a contingency of the purchase.
Light & Wonder stood by its forecast of $1.4 billion in cash flow in 2025, not including any contribution from Grover. On a February 18 investor call, company CEO Matt Wilson cautioned Wall Street analysts not to expect more than an “incremental” contribution from Grover to the Light & Wonder bottom line this year.
Jonas added that Light & Wonder “does not expect any changes to its share-buyback strategy and will continue to purchase shares opportunistically moving forward.”
As for Grover Gaming, Jonas recounted its vital statistics, including its 82 percent cash flow margin on charitable gambling. The privately held game-maker went from $65 million in cash flow in 2022 to $111 million in 2024 and from revenue of $81 million three years back to $135 million last year.
Jonas couldn’t be certain, but indicated that he believed Grover to be the second-largest company in the charitable-gambling space. Its leading rival is Arrow International.
Grover Gaming counts 1,500 customers and an installed base of 10,000-plus devices (at an estimated win per day of $37), spread over five states. Light & Wonder execs have identified Minnesota and Maryland as prime targets of opportunity as they look to expand beyond Grover’s current territories.
Jonas described Light & Wonder as still aiming for its 2025 cash flow target, but seeking growth into adjacent fields of gambling. “The acquisition of Grover Gaming’s assets enables LNW to leverage its content to new customers in the charitable gaming space which has high barriers to entry,” he wrote.
Light & Wonder brass “highlighted Grover’s loyal customer base with strong existing relationships supported by local sales teams, which further builds out its competitive moat,” Jonas continued. He said that the company could expand into as many as six more states, “though we don’t believe this factored into the management’s deal underwriting.”
Wilson called return on investment for the Grover deal “a relatively low ROI hurdle.” Jonas concurred, citing “the light infrastructure nature of the charitable gaming industry.” He valued the acquisition as worth $3 of the Light & Wonder stock price, even if the latter firm doesn’t achieve the potential $200 million in incentives.
In conclusion, Jonas opined that consolidation elsewhere in the game-making sector should benefit the increasingly stable Light & Wonder. He also held out hope for the return of Dragon Train, in revamped form.
