Brightstar Wins Wisconsin Lottery Contract, Yet Leverage and Italian Risks Cloud Investment Case

What happened

Brightstar Lottery PLC secured an eight-year base contract with the Wisconsin Lottery to deploy its OMNIA solution, following a competitive procurement that includes extension options. This win bolsters its U.S. footprint, where it already serves 36 of 48 state lotteries, reinforcing its contractual moat in a key market. However, the company remains burdened by high leverage, with Net Debt/EBITDA at 4.3x and interest coverage of 2.8x, as highlighted in recent filings. Free cash flow has turned volatile post-divestiture, and critical uncertainties like the Italian Gioco del Lotto license renewal persist, tempering earnings stability. While the contract adds incremental revenue visibility, it does little to address the structural financial and concentration risks that underpin the current cautious investment stance.

Implication

Investors should note that this contract win demonstrates Brightstar's competitive strength in securing new lottery business, potentially extending cash flow visibility in the U.S. market. However, the financial impact is likely limited relative to the company's overall revenue base, which is heavily concentrated in Italy and other U.S. contracts with termination risks. The win does not directly alleviate the urgent need for deleveraging, as highlighted by a Net Debt/EBITDA ratio of 4.3x and volatile free cash flow. Critical overhangs, such as the Italian license outcomes and legal exposures in major markets, could still trigger significant earnings declines if unresolved. Therefore, while positive, this news alone is insufficient to justify a more bullish view without clearer progress on balance sheet repair and Italian license terms.

Thesis delta

The Wisconsin contract slightly improves the U.S. contract retention outlook, a key watch item in the DeepValue report, by adding a long-term revenue stream. However, it does not shift the core investment thesis: Brightstar's valuation discount remains largely compensation for real balance sheet and license risks, and the 'WAIT' recommendation stands until deleveraging is visible and Italian license uncertainties are resolved. This win is a minor positive that underscores operational execution but does not alter the high-risk profile requiring further de-risking.