Scientific Games Corp., a Las Vegas-based gaming equipment manufacturer, narrowed its loss and boosted its revenue for the fourth quarter, aided by growth in all three of the company’s business segments — gaming, lottery and interactive.
During a Thursday conference call announcing the company’s results, Scientific Games executives said they foresaw continued growth, especially given the company’s recent acquisitions.
In a statement Wednesday, the Las Vegas-based company said its net loss was $43.1 million, or 48 per share, for the three months ended Dec. 31, compared with a net loss of $110.8 million, or $1.26 per share, a year earlier.
The earnings-per-share loss was wider than the 29-cents-per-share forecast of eight analysts polled by Yahoo Finance.
A $14.8 million decrease in interest expense and a surge in operating income to $97.2 million, reversing a year-earlier $12.3 million loss, helped shrink the quarter’s overall net loss.
During Thursday’s conference call, Scientific Games CEO Kevin Sheehan noted that his company has increased revenue, operating income and earnings before interest, taxes, depreciation and amortization in nine consecutive quarters.
“Our team is achieving solid results and our momentum continues to strengthen,” Sheehan said.
Fourth-quarter revenue rose 8.6 percent to $823 million from $752.2 million.
Scientific Games said its gaming segment revenue in the quarter rose 7 percent from a year earlier to a quarterly record $492.5 million, driven by global shipments of 10,249 new gaming machines.
Sheehan noted that replacement unit shipments in the United States and Canada in the quarter rose 23 percent from the previous year, and gaming systems revenue rose 31 percent, attributable to a systems rollout to casinos in Alberta, Canada.
“We believe Caesars (Entertainment) sparked a replacement cycle last year following its exit from bankruptcy,” Union Gaming analyst John DeCree said in a research note. “In our view, (Scientific Games) gained at least its fair share, if not more, of the uptick in replacements evidenced by the strong fourth quarter North America unit sales number. We expect other operators are already following suit and updating some of their slot product as we are seeing better slot yields across regional markets. It’s been a long wait, but we believe we are at the start of a replacement cycle.”
The company’s lottery segment revenue rose 9 percent to $217.2 million led by a quarterly record level of instant games revenue. Interactive segment revenue grew 24 percent to $113.3 million.
Scientific Games has already had a busy 2018. On Jan. 5, the company completed its acquisition of NYX Gaming for $631 million.
“NYX adds a leading capability is sports wagering and online real-money gaming platforms to our own strengths in online gaming content,” Sheehan said during the conference call. “In addition to building on their own solid track record of growth globally, we believe we are well positioned to participate in any liberalization on any sports betting and online gaming.”
Also in January, Scientific Games bought Tech Art, a supplier of blackjack hole-card readers, for an undisclosed price. The deal included Tech Art’s table games SuperFun 21 and Bet the Bust.
On Feb. 22, the company said it will deliver a new, suite of lottery retail terminals, including tablet-based technology to Lotto Berlin’s network of 950 retailers. Financial terms weren’t disclosed.
And Monday, Scientific Games said it would spend an undisclosed sum to buy a majority stake in E-SYS Techologia EM Informática S.A., a video bingo content studio in Sao Paulo, Brazil.
In a research note after the Jan. 5 NYX acquisition, Zacks said it foresaw Scientific Games’ acquisitions continuing.
“We believe that the company will continue to pursue accretive acquisitions, which will boost its market share and customer base going forward,” Zacks said. “However, the company’s leveraged balance sheet results in significant interest expense. Adding more debt for funding acquisitions will further enhance its indebtedness and weigh on its profitability.”
For the full year, Scientific Games narrowed its net loss to $242.3 million, or $2.72 per share, from $353.7 million, or $4.05 per share, a year earlier.
Full-year revenue rose 3.4 percent to $3 billion from $2.9 billion.
Scientific Games shares fell $4.03 or 9.06 percent, Thursday to close at $40.42 on the Nasdaq. In after-hours trading, the shares rose 61 cents, or 1.51 percent, to $41.04.
