# Brightstar Lottery: a 9.7% dividend yield that the next three years of cash do not cover BRSL, NYSE. Published October 19, 2026. Price is a quote at 10:48 New York time on October 19, 2026. ## Verdict: REDUCE at $9.44 At $9.44 the shares trade 18.5% above my Base value of $7.96, a downside of 15.6%. The business is a real franchise, but Italian license fees, minority owners and contract investment take most of the cash before it reaches ordinary shareholders, and the 9.7% dividend is paid from borrowing in my Base until about 2029. The two methods differ by 59.6%, so Confidence is D and the required margin of safety is 55%, which puts the maximum buy price at $3.58. Reduce for holders, watchlist for new money. Third quarter results on November 10 are not in this analysis. - Bear value: $1.33 - Base value: $7.96 - Bull value: $19.79 - Downside to base value: 15.6% - Maximum buy price: $3.58 - Required margin of safety: 55% - Dividend yield at $9.44: 9.7% - Base parent cash 2027 / dividend cost: $52m / $170m - Company net debt, June 30: $3.79 billion - Business quality: 54/100 - Valuation score: 29/100 - Confidence: 11/25, grade D Brightstar Lottery pays $0.92 a share in dividends, a 9.7% yield, and that costs about $170 million a year. In my Base, cash left for ordinary shareholders after every required payment is $2 million in 2026, $52 million in 2027 and $98 million in 2028. Net debt under the company's own definition was $3.79 billion at the end of June, against a market value of about $1.7 billion. The gap is filled by Italian license fees, minority owners and contract equipment. At $9.44, a quote from 10:48 New York time on October 19, 2026, the shares trade 18.5% above my triangulated Base value of $7.96. The Bear value of $1.33 is 86.0% below the price and the Bull value of $19.79 is 109.6% above it. Confidence is grade D (11/25), the required margin of safety (MOS) is 55%, and the maximum buy price is **$3.58**. Other single-input tests move that ceiling between $1.80 and $4.51. The latest verified statements are the six-month report to June 30, 2026. The third quarter report comes on November 10, 2026 and is not in these numbers. Valuation route: lottery systems and Italian lottery operator with heavy contract investment. Primary method: parent owner cash in 2029, after minority payments, all investment and the cost of renewing licenses, capitalized at 9 times, plus the dividends paid on the way, discounted at 11%. Secondary method: a long-run cash model to 2043 that uses the same 2029 cash and values the later license renewals explicitly. Classification: standard company, 4 of 12 on the scorecard. All amounts are US dollars unless a euro figure is stated. Values are present fair value estimates, not 12 month price targets. ## What Brightstar is Brightstar Lottery PLC was International Game Technology until July 2025, when it sold its Gaming and Digital business and changed its name and ticker. What remains is a lottery company. It supplies lottery systems and runs facilities-management contracts for lotteries, and it holds the Italian operator licenses for the Lotto game and for Scratch & Win instant tickets. It also has a stake in lottery operations in New Jersey and in Brazil. Fiscal years end December 31. The business is built on long contracts, but it does not own all of what it consolidates. Revenue was $2,511 million in 2025, $2,512 million in 2024 and $2,529 million in 2023, essentially flat. The ownership matters more than the headline: - **Lotto (Lottoitalia):** 61.5% owned. A license for nine years began on December 1, 2025, and its final payment of €1.43 billion ($1.675 billion) was made in April 2026. - **Scratch & Win (Lotterie Nazionali):** 64% owned. The concession expires in September 2028, and no renewal price has been announced. - **New Jersey (Northstar):** about 65% effective interest. **Brazil:** two 50% joint ventures that are not consolidated. - **Customers:** the largest customer was about 37% of 2025 revenue, and Italy is about 40% of the retained business (annual report, as I have it). - **Control:** De Agostini held about 46% of the ordinary economics and about 63% of the votes at February 2026, including loyalty votes. Special voting shares are not counted as extra shares. In 2025 income attributable to minority holders was $136 million, against $135 million of consolidated continuing income. That is the reason I do not value consolidated EBITDA. ## The latest results | $ million | Six months to June 2026 | Six months to June 2025 | Year 2025 | | --- | --- | --- | --- | | Revenue | 1,171 | 1,214 | 2,511 | | Adjusted EBITDA | 573 | 524 | 1,121 | | Net cash from operating activities | -1,174 | 473 | -193 | | Italian Lotto license payment inside it | 1,675 | none | 926 | | Capital spending | 232 | n/a | 316 | Revenue fell 3.5% in the half year partly because the company amortizes the extra up-front license fees against revenue, which depresses reported sales and not wagering. Adjusted EBITDA grew 9.4%. Operating cash flow was hugely negative only because of the $1,675 million Lotto payment. Before that fee, operating cash flow was about $501 million in the half year. | Fiscal 2026 outlook, reaffirmed August 4 | Company | | --- | --- | | Revenue | $2.50 to $2.55 billion | | Adjusted EBITDA | $1.16 to $1.19 billion | | Cash from operations excluding the Lotto payment | about $750 million | | Cash from operations including it | about -$900 million | | Capital spending | $450 to $475 million | The company's medium-term targets are about $1.3 billion of EBITDA in 2028 and free cash flow above $400 million after the investment peak. Management says the $400 million is before up-front license fees. A quarterly dividend of $0.23 was paid on September 1. ## Which cash to value I value parent owner cash: operating cash flow after interest and tax, less all capital spending, less dividends and capital returned to minority holders, less finance-lease principal, less a cash charge for stock pay. Then I charge the cost of keeping the licenses, because without them the business is gone. EBITDA, the $400 million target and cash flow before license fees are not that number. | $ million | FY2023 | FY2024 | FY2025 | H1 2026 | | --- | --- | --- | --- | --- | | Operating cash flow | 888 | 709 | -193 | -1,174 | | Add back Lotto payment (diagnostic only) | 0 | 0 | 926 | 1,675 | | Operating cash flow before that fee | 888 | 709 | 733 | 501 | | Capital spending | -147 | -149 | -316 | -232 | | Dividends to minority holders | -151 | -159 | -163 | -163 | | Capital returned to minority holders | -74 | -73 | -69 | -31 | | Stock pay replacement | -34 | -38 | -15 | -14 | | Finance-lease principal | -8 | -6 | -8 | n/a | | Parent cash before license fees | 474 | 284 | 162 | 61 before leases | Parent cash before license fees fell from $474 million to $162 million in two years, and the three-year average is $306.7 million. That average leaves out the fee for the next license, so it is not a level that can be paid out forever. The actual all-in cash for 2025 was -$431 million once the $386 million minority capital injection, the Lotto fee and a $53 million Brazil investment are included. For the half year to June 2026 the same measure was about -$964 million before finance leases. Those two numbers are why I do not trust a pre-license cash yield. For the 2028 Scratch & Win renewal I assume a gross fee of €1,000 million, about $1,150 million at 1.15 dollars per euro. Minority holders fund 36%, so the parent pays $736 million. The fee is my estimate: the previous renewal price was around €800 million, and I test €600 million to €1,400 million. The Lotto renewal in 2034 is assumed at €2,230 million gross, $1,577 million for the parent, repeating every nine years. No renewal is treated as free. ## Debt, shares and other claims | June 30, 2026 | $ million | | --- | --- | | Debt principal | 4,383 | | Cash and cash equivalents | 558 | | Restricted cash | 21 | | Company net debt (also adjusts for issue costs) | 3,791 | | Revolving facility availability | 1,185 | | Debt principal against the last twelve months of EBITDA ($1,170m) | 3.75x | Net debt on the company's definition is about 3.2 times the last twelve months of adjusted EBITDA. In September the company priced €500 million of 4.875% notes due 2032 and used part of it to buy back €342.2 million of its 2.375% notes due 2028. €157.8 million of the old notes remains. I assume the rest of the new money repaid the revolver, so gross debt stays near $4.4 billion. | Estimated cash at October 19, $ million | Amount | | --- | --- | | Cash at June 30 (reported) | 558 | | Operating cash after June, before capital spending (my estimate) | +149 | | Capital spending (my estimate) | -138 | | Minority payments (my estimate) | -25 | | September dividend (about) | -43 | | Share repurchases in July and August (disclosed) | -10 | | Refinancing fees (my estimate) | -10 | | Foreign exchange and other (my estimate) | +19 | | Gross cash | 500 | | Less cash held for banks, trapped cash and an access reserve | -140 | | Usable cash | 360 | | Operating cash kept in the business | 300 | Only the June balance, the dividend and the disclosed buyback are anchored. The operating amounts between June and October are my estimates, not a third quarter balance sheet, and I test usable cash of $260 million and $460 million. The $300 million kept as operating liquidity gets no separate credit as surplus. | Share bridge, million shares | Amount | | --- | --- | | Ordinary shares, December 31, 2025 | 186.852 | | Ordinary shares, June 30, 2026 (rounded) | 184 | | Quoted current ordinary shares | about 183.37 | | Allowance for earned awards and rounding (my estimate) | +1.63 | | Economic shares used | 185.0 | Future stock pay is charged as a $30 million annual cash cost, so I do not also add new shares. If instead the company paid in shares, the count would grow by about 10 million and my Base would be about $8.86, so the choice does not decide the verdict. The ASR in 2025 bought about 15.2 million shares for $250 million, or about $16.45 each. **Liquidity timing.** In my Base gross debt peaks at $5.29 billion at the end of 2028, right after the Scratch & Win fee, and net of $300 million of operating cash that is 3.8 times 2028 EBITDA. After the September refinancing, a revolver draw plus new Base borrowing and the 2027 to 2028 term amortization would, on my arithmetic, exceed the revolver capacity by at least about $0.2 billion. That has to come from term refinancing, lower distributions or other liquidity. I have not seen covenant definitions, so I make no claim about covenant headroom. At the last report the company said it was in compliance with all covenants. ## Operating build behind the Base | $ million | 2026 reference | 2027 | 2028 | 2029 | | --- | --- | --- | --- | --- | | Revenue | 2,525 | 2,625 | 2,750 | 2,825 | | Adjusted EBITDA | 1,175 | 1,225 | 1,300 | 1,330 | | Operating cash at the reference funding cost | 750 | 800 | 875 | 950 | | Operating cash after my financing feedback | 749.9 | 797.4 | 853.3 | 915.0 | | All capital spending | -462.5 | -450.0 | -450.0 | -250.0 | | Minority payments | -235 | -240 | -250 | -280 | | Finance-lease principal | -20 | -25 | -25 | -25 | | Stock pay replacement | -30 | -30 | -30 | -30 | | Parent cash before license fees | 2.4 | 52.4 | 98.3 | 330.0 | | Parent share of the 2028 Scratch & Win fee | | | -736.0 | | Only the remaining 73 days of 2026 are valued, because the rest has been earned or paid. Capital spending of $450 million to $475 million in 2026 is the company's guidance; the later path is mine. Spending stays at $450 million through 2028 and drops to $250 million in 2029, my estimate of steady replacement. The 2028 gap of $200 million between those levels is 7.3% of sales, so I charge all of it. The company's target of 2028 EBITDA near $1.3 billion is used as is. The 2029 operating cash of $950 million is cut to $915 million by the extra interest on higher debt, and after capital spending, minority payments, leases and stock pay the parent keeps $330 million, not the $400 million the company talks about. ## Primary valuation: owner cash less the cost of the licenses I capitalize the 2029 parent cash at 9 times, the multiple I use for leveraged and variable cash flows. It is not raised for the dividend yield or a low earnings ratio. From it I subtract the present value of every future license payment, because 2029 cash is only available if the licenses are renewed: Lotto in 2034 and every nine years, Scratch & Win in 2037 and every nine years, discounted at 11%. | Base primary valuation, $ million unless per share | Amount | | --- | --- | | 2029 parent cash before license fees | 329.95 | | Capitalized at 9 times | 2,969.55 | | Present value at 2029 of all future parent license payments | -2,061.06 | | Equity value at the end of 2029 | 908.49 | | Per share at the end of 2029 | $4.91 | | Discounted to today, 3.2 years at 11% | $3.52 | | Dividends along the way: $0.23 in 2026, then $0.92 a year, discounted | $2.43 | | Primary value today | $5.94 | The 2028 fee is paid inside the transition and is therefore not in the future-license present value, which starts with Scratch & Win in 2037. The 2025 and 2026 Lotto payments are already in the opening debt and cash, so I do not subtract them again. I do not subtract net debt again from the capitalized cash either: debt enters through interest, borrowing needs and dividends in the transition. | Transition ledger, Base, $ million | 2026 stub | 2027 | 2028 | 2029 | | --- | --- | --- | --- | --- | | Opening gross debt | 4,383.0 | 4,365.1 | 4,482.9 | 5,290.7 | | Parent cash before the up-front fee | 0.5 | 52.4 | 98.3 | 330.0 | | Parent up-front fee | 0.0 | 0.0 | 736.0 | 0.0 | | Dividends | 42.6 | 170.2 | 170.2 | 170.2 | | Net borrowing or repayment | -17.9 | 117.8 | 807.9 | -159.8 | | Closing gross debt | 4,365.1 | 4,482.9 | 5,290.7 | 5,131.0 | Usable cash stays at $300 million throughout, and every dollar of shortfall is borrowed. Interest is calculated on average debt at 5.5%, less 2% on cash, and is fed back into operating cash with a 25% tax benefit. Debt rises from $4.38 billion to $5.29 billion at the end of 2028 and falls back to $5.13 billion during 2029, once the investment peak and the fee are behind. ## Secondary valuation: a long-run cash model The second method uses the same 2029 cash but lets the franchise run on: operating cash after tax grows 3% a year in 2030 to 2034, 2% in 2035 to 2039 and 1.5% from 2040, with fixed interest of about $276 million a year on the end-2029 debt (after a 25% tax benefit). It deducts the license payments in the years they fall due (2034, 2037, 2043) and values a Gordon continuation after 2043 less the license payments after that date. | Base long-run model, $ million | Parent cash before fees | Fee paid | Present value at 2029 | | --- | --- | --- | --- | | 2030 | 349.5 | 0 | 314.8 | | 2034 | 419.3 | 1,577.2 (Lotto) | -687.1 | | 2037 | 457.7 | 736.0 (Scratch & Win) | -120.8 | | 2043 | 527.0 | 1,577.2 (Lotto) | -243.6 | | Continuation value after 2043 | 5,662.9 | -1,895.8 of later fees | see total | | Equity at the end of 2029 | | | 2,213.1 | That is $11.96 a share at the end of 2029, and with the same dividends **$10.99 today**. This method gives more value to the length and growth of the franchise. It assumes that cash flows are retained before each fee year, so the negative years are a use of accumulated cash and not a call on shareholders. If funding cannot bridge those years, the value is lower. - **Shared by both methods:** 2029 revenue and cash conversion, capital spending, minority payments, the financing, the dividends and the license fees. More than half of the estimates are the same. - **Different in each:** the first applies a multiple I choose and subtracts the later fees as a present value, the second grows the cash explicitly and has a long continuation. - **What agreement would prove:** little. The two Base values are 59.6% apart, so there is no agreement to give credit for, and in the Bear case both are floored at zero, which makes their match meaningless. ## History, peers and growth diagnostics A clean history of the market price against owner cash for the retained business does not exist, because the old International Game Technology price included the sold gaming business and the $3 special dividend. At today's value of about $1,746 million (185 million shares), the three-year average of $306.7 million of parent cash before fees is 5.7 times. The 2025 figure of $162 million is 10.8 times. Those ratios leave out license costs, and the all-in cash for 2025 was negative, so I do not pick the cheapest of them. For a peer I looked at Pollard Banknote (TSX: PBL), a lottery products company. On my calculation from its reports it trades at about 5.5 times adjusted EBITDA, including its share of a joint venture and lease liabilities, with an EBITDA margin of about 19% against about 46% for Brightstar. Pollard has no Italian operating licenses, and I cannot value the minority stakes in Brightstar's subsidiaries from outside, so I give the comparison no weight and do not apply 5.5 times to Brightstar. I did not build a sector median. Third-party rounded estimates put adjusted earnings per share at about $0.52 in 2026 and $0.72 in 2027, against $0.91 in 2025. That is 18.2 times this year's adjusted earnings, growth of 38% and a ratio of growth to earnings multiple of 0.47. It looks cheap, but the base is depressed, the business changed and the figure ignores license amortization, interest and stock pay that the cash view includes. I give it no weight. | Cash recovery check | FY2025 | FY2029 Base | | --- | --- | --- | | Parent cash before license fees, $ million | 162 | 329.95 | | Growth, a year | | 19.5% | | Per share (197 million weighted shares, then 185 million) | $0.82 | $1.78 | | Growth per share, a year | | 21.4% | | Yield on $1,746 million before future license costs | 9.3% | 18.9% | | Hard cash equivalent after the license charge, $ million | -431 all-in | 100.9 | | Yield on $1,746 million after the license charge | not meaningful | 5.8% | The hard cash equivalent in 2029 is $329.95 million less one ninth of the license present value, $229 million a year, giving $100.9 million, or $0.55 a share. The dividend of $170 million is about 169% of it. A growth rate from a negative base is not meaningful, and the 19.5% is a recovery from a low investment year, not organic compounding. I found no consensus for cash and no revision history, so the reliability of these estimates is low. ## Valuation triangulation | Triangulation | Bear | Base | Bull | | --- | --- | --- | --- | | Owner cash less license costs (weight 60%) | $1.33 | $5.94 | $17.53 | | Long-run cash model (weight 40%) | $1.33 | $10.99 | $23.17 | | Triangulated value | $1.33 | $7.96 | $19.79 | | Against the price of $9.44 | -86.0% | -15.6% | +109.6% | The Base values differ by 59.6% against their midpoint, far over my 30% line, so I cut Confidence from C to D and added no second margin-of-safety charge for the same problem. The first method gets 60% because I believe a capitalization that charges every renewal is the safer way to treat uncertain fee economics. The second gets 40% because the contract length and the post-2029 growth are real. Weights are judgments, not probabilities. On the first method alone the Base is $5.94, on the second $10.99, and the second is above today's price. That is why the answer to whether the stock is cheap depends on which method you trust. The Bear $1.33 is only the present value of reduced dividends. It is not a liquidation floor, and equity could be worth close to zero if the board stops paying. ## What is the market already pricing in? | One change at a time, others at Base | Price implies | My Base | | --- | --- | --- | | 2029 operating cash at the reference funding cost, $ million | about 986 | 950 | | Primary exit multiple | 10.9x | 9.0x | | Gross Scratch & Win fee, € million | about 533 | 1,000 | | Equity discount rate | 7.2% | 11% | These are alternative answers, not one forecast. None of them looks absurd. The price asks for about 4% more operating cash in 2029, or a fee for Scratch & Win about half my central figure, or a multiple of nearly 11 times despite the leverage. A market that focuses on the $400 million cash ambition and a long franchise life could easily get there, so I do not argue the stock is wildly expensive. I argue it offers no margin for error. To make $9.44 equal half of fair value, 2029 operating cash would have to be about $1.2 billion. A modeled return from today's price is 4.5% a year in Base, -53.9% in Bear and 42.0% in Bull, counting only the forecast dividends and the exit. An illustrative required return of 15% would call for an entry at $7.21 and 20% at $6.40, before any margin of safety. ## Bear, base and bull scenarios | Scenario | Bear | Base | Bull | | --- | --- | --- | --- | | 2029 revenue, $ million | 2,600 | 2,825 | 3,000 | | 2029 adjusted EBITDA, $ million | 1,200 | 1,330 | 1,470 | | 2029 operating cash at the reference cost, $ million | 830 | 950 | 1,100 | | 2029 capital spending / minority payments, $ million | 300 / 270 | 250 / 280 | 225 / 300 | | Debt cost | 6.5% | 5.5% | 5.0% | | Gross Scratch & Win fee / next Lotto fee, € million | 1,400 / 3,000 | 1,000 / 2,230 | 800 / 2,000 | | Parent 2028 fee, $ million | 1,030.4 | 736.0 | 588.8 | | New equity | $300m at $6, 50m shares | none | none | | Dividend per share 2027 to 2029 | $0.46 | $0.92 | $0.92 | | Primary multiple | 8x | 9x | 11x | | 2029 gross debt, $ million | 5,458 | 5,131 | 4,536 | | Value today, first method | $1.33 | $5.94 | $17.53 | | Value today, long-run model | $1.33 | $10.99 | $23.17 | | Triangulated value today | $1.33 | $7.96 | $19.79 | | Against the price of $9.44 | -86.0% | -15.6% | +109.6% | | Modeled annual return with dividends and exit | -53.9% | 4.5% | 42.0% | **Bear:** weaker demand and conversion, higher capital spending, a dearer Scratch & Win bid and tighter financing, with a hypothetical $300 million share issue before the 2028 fee. Even then, nothing is left for shareholders after the licenses. If neither refinancing nor new equity were available, equity could be worth nothing. **Base:** investment normalizes in 2029, fees are as assumed and the dividend is paid out of borrowing until then. **Bull:** deployment is completed, conversion is stronger, bids are lower and debt is cheaper. I assign no probabilities, and the Base is not an expected price. | Discount rate / primary multiple | 7x | 8x | 9x | 10x | 11x | | --- | --- | --- | --- | --- | --- | | 9% | $7.26 | $7.40 | $8.21 | $9.02 | $9.84 | | 11% | $6.43 | $7.20 | $7.96 | $8.73 | $9.50 | | 13% | $6.31 | $7.04 | $7.76 | $8.48 | $9.21 | The grid shows triangulated Base value. A lower discount rate also raises the present value of the license payments, so the values do not move as in a plain perpetuity, and only the best corner is above today's price. ## How the buy price is set A Confidence score of 11 is grade D, whose base margin of safety is 50%. I add 5 points for something the operating model does not cover: whether the money can actually be raised and sent up from the subsidiaries when needed. The required MOS is **55%**, and the maximum buy price is $7.96 times 0.45, or **$3.58**. At a 50% MOS it would be $3.98 and at 60% $3.19. I add nothing for method divergence, leverage or concentration, since those are already in the scenarios and in the Confidence grade. | Estimated input | Tested values | Base value today | Ceiling at 55% MOS | | --- | --- | --- | --- | | 2029 operating cash, $ million | 830 / 900 / 950 / 1,000 / 1,100 | $3.56 / $5.90 / $7.96 / $10.03 / $14.17 | $1.60 / $2.66 / $3.58 / $4.51 / $6.38 | | 2029 steady capital spending, $ million | 225 / 250 / 300 / 350 | $8.96 / $7.96 / $5.97 / $4.01 | $4.03 / $3.58 / $2.69 / $1.80 | | Gross Scratch & Win fee, € million | 600 / 800 / 1,000 / 1,200 / 1,400 | $9.23 / $8.60 / $7.96 / $7.33 / $6.70 | $4.15 / $3.87 / $3.58 / $3.30 / $3.02 | | Next Lotto fee, € million | 2,000 / 2,230 / 3,000 | $8.58 / $7.96 / $5.91 | $3.86 / $3.58 / $2.66 | | Debt cost | 4.5% / 5.5% / 6.5% / 7.5% | $9.47 / $7.96 / $6.39 / $4.76 | $4.26 / $3.58 / $2.88 / $2.14 | | Usable cash, $ million | 260 / 360 / 460 | $7.80 / $7.96 / $8.13 | $3.51 / $3.58 / $3.66 | The ceiling therefore runs from $1.80 (capital spending of $350 million) to $4.51 (operating cash of $1 billion). This is a range of one-input stresses and not a confidence interval, and it is not a limit order. The fair value itself crosses today's price at about $986 million of operating cash in 2029, so the label flips around plausible cash assumptions, but even then there is no 55% margin of safety at the market. If financing for the licenses cannot be established, the framework answer is no buy at any price. I keep four numbers apart. Fair value today is $7.96. The modeled return at $9.44 is 4.5% a year. An entry price for an illustrative 15% return is $7.21 and for 20% it is $6.40, neither multiplied with the margin of safety. The margin of safety against model error gives $3.58. Where each risk is priced: - **Bid size and the capital spending cycle:** in the fees, capital spending and funding ledger of each scenario. No separate license charge in the margin of safety. - **Interest cost and leverage:** in the interest on modeled debt and the cost sensitivities, and in the 9 times multiple. - **Whether funds can be raised and sent up:** the 5 point increment. - **Method divergence:** in the move from Confidence C to D. No second charge. - **Customer and regulator concentration:** in the scenarios and the predictability score. ## Dividend The quarterly dividend is $0.23, $0.92 a year, 9.7% at $9.44, and costs about $170 million on 185 million shares. The $3 special dividend in July 2025 came from the sale proceeds and is excluded. The dividend was interrupted around the pandemic and reset by the sale, so this is not a record of steady growth. | Dividend test | Result | | --- | --- | | Annual cost of $0.92 on 185 million shares | $170.2 million | | Base parent cash before fees, 2026 (full-year reference) | $2.4 million | | Base parent cash before fees, 2027 | $52.4 million, about 31% cover | | Base parent cash before fees, 2028 | $98.3 million, before the new fee | | Base parent cash before fees, 2029 | $330.0 million, a 51.6% payout | | 2029 hard cash equivalent | $100.9 million, dividend about 169% of it | In my Base the dividend is financed by retained opening cash and borrowing during the deployment years. Cutting it would preserve borrowing capacity, but the investor would lose the cash. The yield is a risk signal, not an annuity, and a board that put license funding ahead of distributions under stress would be acting rationally. ## Reasons to own Brightstar - **An embedded operating moat.** Reliable lottery systems, retailer networks and regulatory execution are hard to replace and support repeat contracts. - **The Lotto term is secured.** The nine-year license from December 2025 is in place and paid. - **Cash recovery after the investment peak.** If capital spending really falls to $250 million, parent cash would rise from $52 million to $330 million, and the Bull reaches $19.79. - **Execution on the sale and funding.** Management closed the Gaming sale, returned capital, repaid more than $2 billion of debt and refinanced part of the bonds in September. These justify watching. They do not show that the cash arrives in time for the dividend. ## What could go wrong? - **Concession economics.** Italy and a large public counterparty are a big part of revenue, and the 2028 Scratch & Win renewal is unpriced. A fee of €1,400 million alone takes the Base to $6.70. - **Funding and the dividend.** Fees, contract capital spending and maturities come before the cash recovery. A debt cost of 7.5% takes the Base to $4.76, and refinancing that fails could force dilution, a cut or worse. - **False cash normalization.** The $400 million ambition excludes up-front fees, and a drop in capital spending is not yet shown. Capital spending of $350 million in 2029 gives $4.01. - **Ownership leakage.** Minority claims, restrictions on moving cash, loyalty voting control and stock pay mean a good consolidated year can still be a weaker year for ordinary holders. ## Management execution | Management record, 2023 to 2026 | Score | Evidence | | --- | --- | --- | | Execution (max 5) | 4 | Sale completed, Lotto license secured and paid, outlook reaffirmed in August, September refinancing done | | Capital allocation (max 5) | 2 | The 2025 ASR paid about $16.45 a share, 74% above today's price | | Disclosure and definitions (max 5) | 3 | Good bridges, and the company discloses that its cash target excludes up-front fees | | Shareholder alignment (max 5) | 2 | Incentives use EBITDA measures, awards were modified after the sale, and one holder controls the votes | | Total | 11 of 20 | Mixed record | A clean multi-year record of guidance against results for the retained business does not exist, because earlier targets covered a different group, and I did not make up a batting average. Retained operations produced $474 million of parent cash before license fees in 2023 and $284 million in 2024, but shares ended 2024 above 2023 despite the repurchase authority. **Assessment: 11/20, credit for the transactions, caution about what was paid for buybacks and how pay is defined.** ## Stock Analyza scorecard | Scorecard item | Points | Why | | --- | --- | --- | | Five-year return on all invested capital (max 2) | 0 | Not established on the retained business with the full cost of the licenses | | Five-year revenue growth (max 2) | 0 | Revenue was flat from 2023 to 2025 | | Five-year owner cash per share growth (max 2) | 0 | Not shown, and the sale broke the series | | Balance sheet (max 1) | 0 | Material leverage and refinancing needs | | Unit economics (max 1) | 1 | Scale, integrated systems and embedded customers | | Repeat economics (max 2) | 2 | Long contracts support repeat activity | | Reinvestment runway (max 2) | 1 | Digital and Brazil opportunities, parent returns unproven | | Total | 4 of 12 | Standard company | This is a concession and duration story, not an established compounder. A durable operating moat does not remove the funding concentration. | Business quality | Points | Max | | --- | --- | --- | | Moat and pricing power | 16 | 20 | | Economic returns against the cost of capital | 8 | 20 | | Balance sheet and resilience | 7 | 15 | | Earnings and cash flow quality | 7 | 15 | | Growth and reinvestment runway | 8 | 15 | | Management and capital allocation | 6 | 10 | | Governance, dilution and minorities | 2 | 5 | | Total | 54 | 100 | Business quality is **54/100**. Lottery systems are costly to replace: customers need uptime, security and regulatory execution, which protects the contracts. Governments still capture part of the value through bids, fees and terms. Intangible concession assets make a plain return on tangible capital look unusually high, so I do not give credit for it. | Valuation score | Points | Max | | --- | --- | --- | | Discount to triangulated Base | 12 | 40 | | Protection against the Bear case | 1 | 20 | | Agreement between methods | 1 | 15 | | Position against own history and peers | 6 | 10 | | Market-implied expectations | 7 | 10 | | Data and model quality | 2 | 5 | | Total | 29 | 100 | The valuation score is **29/100**. There is no discount to the central value, the Bear case offers no floor and the two methods disagree by 59.6%. ## Confidence score | Confidence component | Points | Max | Note | | --- | --- | --- | --- | | Data quality and sourcing | 3 | 5 | Strong filings, but current cash, awards and future fees are estimates | | Business predictability | 3 | 5 | Recurring contracts with concentrated renewal exposure | | Valuation robustness | 1 | 5 | 59.6% gap between methods and heavy dependence on the 2029 endpoint (cut from 3) | | Accounting transparency | 3 | 5 | Reconcilable, but minority, license, factoring and sale accounting is complex | | Scenario dispersion | 1 | 5 | Equity could approach zero, while a strong recovery supports large upside | | Total | 11 | 25 | Grade D (provisional 13, grade C) | Grade D means low confidence in the size of the value, not certainty that the business fails. The most useful output is the explicit link between licenses, investment, debt and parent cash. More decimal places would not remove the uncertainty. ## What I would watch from here ### Green - Third quarter results that explain cash, capital spending and the 2026 outlook, with a liquidity bridge - 2026 operating cash near $750 million excluding Lotto, capital spending inside $450 million to $475 million - 2027 operating cash near $800 million with capital spending no higher than $450 million - Scratch & Win renewal terms and funding that leave adequate parent returns - 2029 capital spending of $225 million to $250 million and parent cash of $330 million or more - Committed refinancing that covers the peak weeks of the fee ### Yellow - 2026 operating cash between $650 million and $750 million, or help from accruals - 2027 conversion slower, with working capital building - A Scratch & Win fee above my €1,000 million, or incomplete funding - 2029 capital spending between $250 million and $300 million - Borrowing used to support the dividend during the build - Rising minority leakage or new capital commitments in joint ventures ### Red - A guidance cut or a missing liquidity bridge - 2026 operating cash under $650 million with no temporary cause - Loss of the Scratch & Win concession, prohibitive terms, or a fee that cannot be financed - Capital spending of $350 million or more in 2029 (value near $4 before the margin of safety) - A covenant breach, unavailable funding or a forced recapitalization - Dividends that impair funding for the licenses The next review point is the third quarter report, on November 10, 2026 at 8:00 a.m. New York time, announced on October 19. I would not carry the October snapshot past it without review. I would also refresh after any concession, refinancing, dividend or capital allocation announcement. ## The three most important thesis breakers 1. License renewal prices come in well above my central fee, or the fee cannot be financed. 2. Capital spending does not fall to the steady level after 2028, so parent cash stays far below $330 million. 3. Financing or the ability to move cash up from the subsidiaries fails, which takes equity toward zero. ## Stress test and independent check I rebuilt the model in a separate script, solving the debt and interest loop each year. The Base reproduced exactly: parent cash of $329.95 million, license present value of $2,061.06 million, closing 2029 debt of $5,130.99 million, the primary value of $5.94, the long-run value of $10.99 and the triangulated $7.96. The Bear dividend value, the discount rate and multiple grid, the one-input sensitivities, the four reverse solutions, the required-return entries and the 4.5% return also reproduced. The Bull case could not be fully reproduced, because the 2026 to 2028 inputs for it are not given: my approximation gives a first-method value of $17.65 against $17.53. The physical stock pay settlement test gives $8.86, within two cents of the model. I checked the price, the six-month report, the guidance, the dividend, the Lotto payment, the Q3 date and the September notes against the company's releases and filings. | Single change to the Base | Value per share | Against the price | Maximum buy at 55% MOS | | --- | --- | --- | --- | | Operating cash 2029 of $1,000 million | $10.03 | +6.3% | $4.51 | | Operating cash 2029 of $830 million | $3.56 | -62.3% | $1.60 | | Capital spending 2029 of $350 million | $4.01 | -57.5% | $1.80 | | Lower conversion and higher capital spending (cash $870m, spending $275m) | $3.86 | -59.1% | $1.74 | | No tax benefit on financing costs | $7.48 | -20.8% | $3.37 | | All license costs set to zero (not a forecast) | $17.07 | +80.8% | $7.68 | | Generous Bull case with a 9% discount rate | about $22.5 | about +138% | about $10.1 | | Ordinary Bear | $1.33 | -86.0% | not a buy anchor | Setting all license costs to zero is a deliberately implausible case that shows how much the fee exclusion matters in a screen. The generous Bull is quoted by the source model at two values, $22.46 and $22.59, and I could not recompute it, so I show it as about $22.5. The strongest case against my Reduce is that bids may be cheaper than I assume, that finishing the investment cycle may release more cash than I model, and that the franchise may deserve more than 9 times. The Bull of $19.79 and the single-input operating cash of $986 million, which is enough to justify today's price, are both consistent with that. This is why the call is conditional and not a blanket sell. The strongest case against my Base is the reverse: bids can be dearer, spending can stay high and financing can be unavailable when needed, and even the Bear with a funded $300 million share issue leaves no equity value after the licenses. Main data limits: the October cash, usable cash and share count are my estimates from the June balance sheet, and no third quarter balance sheet exists yet. The 2028 and later license prices are not announced. Covenant headroom and the definitions behind it are unknown, and I could not recompute the Bull case or confirm the ownership, customer and incentive details from the annual report. The $9.44 quote could not be matched with a second source: the close on October 16 was $9.50. The Pollard figures and the rounded earnings estimates are from third-party and company reports I did not fully recheck. The call transcript was not used. ## Final verdict: reduce at $9.44 Brightstar has a defensible franchise, but at $9.44 you pay for the cash before the licenses, and the licenses are what the dividend has to be paid from. The price needs a favorable combination of cash conversion, lower capital spending or cheaper bids than my central case, and it offers no margin if one of them fails. The model is wide enough that I would not rely on any one figure. **Verdict: REDUCE at $9.44, watchlist for new money. Triangulated Base value $7.96, downside 15.6%, Confidence D (11/25), required margin of safety 55%, maximum buy price $3.58, one-input range $1.80 to $4.51.** For current holders this means reducing, not panicking: the successful case is real and I show what it requires. For new money it means waiting for funded renewal terms and parent cash that is clearly above my central estimate. ## More analyses on Patreon This analysis is free. Premium members get every in-depth analysis, the full archive and a vote on which stocks get analyzed next: https://www.patreon.com/stockanalyza ## Sources Primary sources include Brightstar's [2025 annual report on Form 20-F](https://www.sec.gov/Archives/edgar/data/1619762/000162828026011083/igt-20251231.htm), the [six-month report to June 30, 2026 on Form 6-K](https://www.sec.gov/Archives/edgar/data/1619762/000162828026052565/brightstar-6302026xform6k.htm), the [second quarter 2026 results release](https://www.brightstarlottery.com/news-and-insights/news-releases/2026/brightstar-lottery-plc-reports-second-quarter-2026-results) of August 4, 2026, the [2025 results and 2026 outlook](https://ir.brightstarlottery.com/news/news-details/2026/BRIGHTSTAR-LOTTERY-PLC-REPORTS-FOURTH-QUARTER-AND-FULL-YEAR-2025-RESULTS/default.aspx) of February 24, 2026, the [completion of the Gaming sale](https://ir.brightstarlottery.com/news/news-details/2025/Brightstar-Lottery-Completes-Sale-of-Gaming--Digital-Business-and-Announces-1-1-billion-Capital-Return-to-Shareholders/default.aspx), the [August 2026 repurchase disclosure](https://www.sec.gov/Archives/edgar/data/1619762/000162828026053415/a6-kxrepurchasesxaugust202.htm), the [2028 financial targets](https://www.sec.gov/Archives/edgar/data/1619762/000162828025048518/q325earningsslidedeck-fi.htm), the [September 2026 note pricing](https://www.sec.gov/Archives/edgar/data/1619762/000162828026061203/newsreleasepricingfinalrr.htm) and [tender results](https://www.brightstarlottery.com/news-and-insights/news-releases/2026/brightstar-lottery-plc-announces-results-of-tender-offer), the [third quarter call announcement](https://www.brightstarlottery.com/news-and-insights/news-releases/2026/brightstar-lottery-plc-to-host-third-quarter-2026-results-conference-call-on-tuesday-november-10-2026), and the [2024](https://www.sec.gov/Archives/edgar/data/1619762/000161976225000007/igt-20241231.htm) and [2023](https://www.sec.gov/Archives/edgar/data/1619762/000161976224000017/igt-20231231.htm) annual reports for earlier share counts. For the peer check I used Pollard Banknote's [second quarter 2026 release](https://www.pollardbanknote.com/wp-content/uploads/2026/08/News-Release-Q2-2026-Final.pdf), [June 2026 statements](https://www.pollardbanknote.com/wp-content/uploads/2026/08/PBL-Q2-2026-FINAL.pdf) and [2025 annual report](https://www.pollardbanknote.com/wp-content/uploads/2026/03/2025-Annual-Report.pdf). The quote and share count come from a third-party market data page ([BRSL](https://stockanalysis.com/stocks/brsl/)), and the rounded earnings estimates from its [forecast page](https://stockanalysis.com/stocks/brsl/forecast/). Broker price targets and ratings are not used. The reference market price is $9.44, a quote from 10:48 New York time on October 19, 2026 while the regular session was open. Values per share use 185 million economic shares. Cash, usable cash and the 2026 to 2029 paths, fees and multiples are analytical estimates, not company guidance. **Disclaimer.** This analysis is provided solely for research and educational purposes. It is not personalized investment, financial, legal or tax advice. Values are estimates, not forecasts or trading instructions. Brightstar is exposed to license renewal prices, leverage and refinancing, minority and regulatory exposure, and its dividend may be cut. Investors can lose part or all of their invested capital. Method: Master Investment Analysis Framework v3.4. Approach: parent owner cash with a transition to 2029, cross-checked with a long-run cash model. Confidence: D/11. Data checks: passed with warnings. Open data gaps: third quarter balance sheet, renewal prices, covenant headroom and the Bull case inputs.