Debt remeasurement and coronavirus-related disruptions weighed heavily on third-quarter earnings for gaming equipment provider Scientific Games. The company posted a revenue drop and a per-share loss, reversing year-earlier income. The revenue beat Wall Street fLas Vegasorecasts; earnings per share didn’t.
Scientific Games’ September board restructuring, sparked by billionaire Ronald Perelman’s sale of his 39% stake, had at least one analyst foreseeing better days ahead.
In a statement issued after stock markets closed Wednesday, Scientific Games said its net loss was $111 million, or $1.23 per share for the three months ended Sept. 30, reversing year-earlier net income of $18 million, or 15 cents per share.
The company said a $24 million loss on remeasurement of debt, which compared with a year-earlier $19 million gain, hurt the latest results, which fell short of the 76-cents-per-share earnings average forecast by analysts surveyed by Seeking Alpha.
Zacks Investment Research noted that Scientific Games has surpassed consensus Wall Street earnings-per-share estimates just once in the past four quarters.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, fell 31.7% to $235 million from $344 million. Scientific Games said COVID-19 disruptions hurt casino operations, which hurt AEBITDA and revenue.
Third-quarter revenue fell 18.4% to $698 million from $855 million but topped the $653.3 million average forecast of Seeking Alpha-polled analysts.
Scientific Games shares were sold off after hours. They dropped $1.36, or 3.86%, to reach $33.90 at 5 p.m. PT.
Scientific Games Chief Executive Officer Barry Cottle didn’t dwell on the numbers, instead saying its games and products poised it for the future and new board members will shape its future tactics.
“(These) leaders … will augment our focus on de-levering our balance sheet and will help the company prudently and thoughtfully shape our corporate strategy.”
Two of the leaders, former Aristocrat CEO Jamie Odell and former Aristocrat Chief Financial Officer Toni Korsano came in September, when Perelman, through his company, MacAndrews & Forbes, sold his Scientific Games stake for $28 per share.
In the deal, Perelman, MacAndrews & Forbes’ CEO, and MacAndrews & Forbes representatives Barry Schwartz and Frances Townsend resigned from Scientific Games’ board. Perelman had been executive chairman of Scientific Games’ board.
Odell and Korsano replaced Schwartz and Townsend on Scientific Games’ board. Odell became executive chairman; Korsano became executive vice chairman.
Also in September, Scientific Games named Tim Throsby, a restructuring expert and former Barclays executive, as an independent board member. Throsby had been CEO of Barclays Bank Plc and president of Barclays International.
After the deal, Jefferies gaming analyst David Katz upgraded Scientific Games to “buy” from “hold” and raised his price target on the stock to $50 from $20.
“The strongest growth, highest valuation, B2C social gaming and B2B iGaming and sports betting businesses should accelerate growth under new leadership, potentially beyond our 2019-22 (compound annual growth rate) of 12%,” Katz said in an investors note.
After it altered its board, Scientific Games shored up its finances. On Oct. 8, the company reached a deal to extend its covenant relief period by three more quarters. (The deal had been amended May 8.) On Oct. 9, Scientific Games paid $100 million against the balance on its revolving credit line.
Meanwhile, to strengthen its internet gambling future, Scientific Games on Oct. 1 agreed to have its sportsbook platform used across Hard Rock International’s digital and retail outlets in Iowa and New Jersey.
In January, Hard Rock International said it will use Scientific Games’ casino management system products, slot and table games, and utility products, for its newest hotel-casino in Sacramento, California.
No financial terms were disclosed for either deal.
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