The coronavirus wave came and crashed, and Scientific Games, like its gambling industry peers, worked to shelter itself, streamlining cost structures, and reassure staff, customers and shareholders.
The results hurt, but the adjusted earnings topped Wall Street forecasts.
The coronavirus, and its related casino business shutdown, littered the Las Vegas-based gaming and lottery equipment provider’s first-quarter results pages with red arrows Monday. The unadjusted quarterly loss widened, and revenue and cash flow fell.
Adjusted for nonrecurring costs, the earnings topped Wall Street forecasts, but revenue missed.
“We are working around the clock to take care of our employees, customers, shareholders and other key stakeholders in these difficult times, while providing uninterrupted products and services to those customers who continue to operate,” Scientific Games CEO Barry Cottle said in a statement. “I am confident that the measures we are implementing now will allow us to take advantage of opportunities to strengthen our business and prepare us to come out of the crisis even stronger than before.”
The company said its net loss was $155 million, or $1.69 per diluted share, for the three months ended March 31, compared will a loss of $24 million, or 26 cents per diluted share, a year earlier.
The latest net loss includes a $54 million goodwill impairment charge related to the company’s legacy gaming reporting unit in the United Kingdom and $37 million in write-down charges related to gaming business segment credit allowances and inventory. COVID-19 disruptions drove all the drops.
However, as mentioned, losses, adjusted for nonrecurring costs and asset impairment costs, were 5 cents per share, which topped the 16-cents-per share average estimate of five analysts surveyed by Zacks Investment Research. Over the last four quarters, the company has surpassed consensus earnings-perp-share estimates once.
Consolidated earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, fell 39 percent to $200 million from $328 million, also hurt by the aforementioned charges.
Revenue fell 13.4% to $725 million from $837 million. The COVID-19 disruptions and related temporary global casino closures and a drop in lottery equipment sales hurt results. Six Zacks-polled analysts had expected $780.7 million in revenue.
Cottle said a diverse assets, products, and services portfolio and investments in digital gaming technologies will poise Scientific Games to excel once the lockdowns lift and the business begins to reproach usual.
Scientific Games Chief Financial Officer Michael Quartieri said the company’s “swift and meaningful reductions to our cost structure” and available liquidity will let the company withstand the pandemic’s fallout.
“I’m confident that our streamlined cost structure will allow for accelerated cash flow generation and deleveraging in the future,” Quartieri said, without specifying the moves.
The statement said nothing specific about workers’ fates, present or future.
The statement contained some bright spots. Scientific Games said it entered the emerging historical gaming machines market, selling 525 units. The company added that it earned contracts for the lottery system in Iowa, technology in Germany, instant tickets in Connecticut, and the Scientific Games Enhanced Partnership program in South Carolina. In a separate March 29 statement, Scientific Games said it extended its deal to be the Missouri Lottery’s primary instant game provider through June 30, 2021.
Scientific Games projected second-quarter consolidated net cash outflow of $70 million to $90 million. The company said it expects the effect of the COVID-19, which accelerated in the latter half of March 2020, to peak in the second quarter.
Scientific Games shares fell 18 cents, or 1.37%, Monday to close at $12.97 on the Nasdaq. The company’s share price has fallen by 51.8% in 2020 and has dropped 41% in the last 12 months.
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