A chain reaction sent Scientific Games Corp.’s financial arrows down in the fourth quarter. Fewer systems launches in Canada and lower machine unit sales meant less overall business, prompting a loss that reversed year-earlier income and misses of Wall Street forecasts for earnings and revenue.
Shares sold off on the news.
In a statement Tuesday issued after stock markets closed, Scientific Games, a Las Vegas-based instant-win lottery ticket maker, posted a loss of $43 million, or 46 cents per diluted share for the three months ended Dec. 31, reversing year-earlier income of $207 million, or $2.21 per diluted share.
Analysts polled by Zacks Investment Research expected income of 22 cents per share in the latest quarter.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that excludes nonrecurring costs, fell 4.4% to $328 million from $343 million in the fourth quarter.
Fourth-quarter revenue fell 2.6% to $863 million from $886 million and missed the $893.7 million forecast of Zacks-polled analysts.
In after-hours trading Tuesday, Scientific Games shares fell $3.07, or 10.45%, to reach $26.32 at 5 p.m. PST. The shares had risen 57 cents, or 1.98%, to close at $29.39.
“The quarter highlights the considerable opportunity for Scientific Games in its key businesses of gaming and sports betting, but also the complexities and risks across the enterprise,” Jefferies gaming analyst David Katz told investors following the earnings announcement.
The company said its installed base of games in the quarter was 31,486, down from 33,585 million a year earlier, a 6.2% year-to-year drop. The removal of old machines offset increased placements in the northeastern United States, the company said.
Gaming machine new unit shipments in the U.S. and Canada decreased 4.7% to 4,510 from 4,733 because of lower replacement units. International new unit shipments also fell, dipping 23.9% to 3,266 from 4,290.
Table game sales (up 8% to $65 million) and lottery systems revenue (up 4.9% to $85 million) were bright spots.
In a statement, Scientific Games CEO Barry Cottle shook off the results and said his company has attracted top-flight staff ready to push the company toward success.
Last month, the company said Matt Wilson, Aristocrat’s former and president and managing director, Americas, will become group chief executive, gaming on March 1.
Siobhan Lane became chief commercial officer, gaming, a new position, on Feb. 1. She had been senior vice president of marketing and gaming operations at Aristocrat Technologies.
Connie James became chief financial officer, gaming on Jan. 6. She had been chief financial officer of the global, land-based Gaming division at Aristocrat Technologies and corporate vice president finance, business operations and supply chain at agricultural products giant Cargill Corp.
“I’m confident we have the right team in place to reach our goal to be the market leader across land-based gaming, lottery, sports and digital gaming driven by leading content and the platforms that enable play anywhere and anytime,” Cottle said. “Our recent contract and deal wins across our businesses, and the globe, highlight that we are on the right path.
Scientific Games said it’s poised to prosper as sports betting expands, having struck a with Flutter Entertainment to provide the sports betting platform for bookmaker and fantasy sports giant FanDuel, and extended partnerships with William Hill and GVC Holdings. Earlier in the month, the company touted the potential of its 007-branded games, themed on the popular James Bond movies, saying 22 international lotteries had signed up to participate in the James Bond Lottery Challenge linked game.
Scientific Games Chief Financial Officer Michael Quartieri said the company cut its net debt by $464 million in 2019 and completed two refinancing transactions to cut future cash interest costs.
For the year, the Scientific Games’ loss narrowed to $130 million, or $1.40 per diluted share from $352 mllion, or $3.87 per share. The company noted that the year-earlier result included a $152 million charge related to a lawsuit settlement with Shuffle Tech.
Full-year revenue rose 1.2% to $3.4 billion from $3.36 billion.
Tuesday’s sell-off slowed upward momentum for Scientific Games. The company’s stock price has increased 9.2% since the beginning of the year and 13.1% in the past 12 months.
“We believe sports betting upside on the recent Flutter partnership and additional deals (potentially announced this week) could help offset negative earnings sentiment,” SunTrust Bank gaming analyst Barry Jonas said. “We remind investors Scientific Games Chairman Ron Perelman has a strong track record of buying opportunistically at times like this.”
Follow Matthew Crowley in Twitter @copyjockey
