Las Vegas-based gambling equipment maker Scientific Games Corp. named a new chief executive amid a shake-up of higher-ups and said debt financing charges led to a wider first-quarter loss, although revenue rose.
In a statement, Scientific Games said Barry Cottle, who has been leading the company’s SG Interactive unit, will company’s president and CEO effective June 1. He’ll replace current CEO Kevin Sheehan, who will become a senior adviser.
In a statement, Scientific Games board Chairman Ronald Perelman credited Cottle with driving Scientific Games’ business growth in the interactive division.
Meanwhile, Scientific Games named Tim Bucher executive vice president and chief product officer. He had been senior vice president and general manager of Seagate Technology’s consumer solutions group.
Scientific Games said its net loss for the three months ended March 31 widened to $201.8 million, or $2.24 per share, from $100.8 million, or $1.14 per share, a year earlier. A $93.2 million loss from debt financing transactions factored in the wider overall loss, the company said.
Operating income fell to $49.4 million from $88 million, weighed down $52.2 million in restructuring and other charges. Attributable earnings before interest, taxes, depreciation and amortization rose 12 percent to $320.1 million from $286.6 million, helped by higher revenue and including NYX.
Revenue rose 12 percent to $811.8 million from $725.4 million.
The inclusion of $49.2 million in revenue from NYX Gaming Group, which the company acquired Jan. 5 for $631 million, boosted the result as did a 7 percent growth in lottery revenue and 21 percent growth in social gaming revenue.
“With improving momentum across all our businesses, we are excited by the prospects and opportunities to smartly grow our revenue and (adjusted earnings) during the remainder of 2018 and beyond,” Sheehan said in a statement accompanying the earnings report.
Scientific Games continued broadening its business during the quarter. On Monday, two days before it reported earnings, Scientific Games said it extended its instant games contract with the Kentucky Lottery Corp. for eight years. Financial terms weren’t disclosed.
In April, it installed its Prizm Gametable at Harrah’s Atlantic City and Bally’s Wild Wild West in New Jersey. The company also launched sports betting systems for Swisslos, the lottery serving Switzerland’s German and Italian-speaking regions, Szerencsejáték Zrt., an online sports betting channel in Hungary.
In March, Scientific Games said convenience store chain 7-Eleven Corp. agreed to test the company’s SciQ instant game technology. The company said the trials are live in Arizona, Ohio, Maine, North Carolina, South Carolina and Texas, and planned for Georgia, New York and Pennsylvania.
Terms of the deals weren’t disclosed.
Earlier this year, the Motley Fool warned that despite Scientific Games’ expansion — it acquired NYX Gaming, a gaming technology company, and blackjack hole-card reader supplier Tech Art, earlier this year — debt made investing in the company risky.
Before the deal for NYX Gaming, Scientific Games’ debt load stood at $8.1 billion.
“If investors learned anything from the last recession, it’s that leverage is what kills companies in the gaming market,” Motley Fool gambling stock observer Travis Holum wrote. “That’s the real concern for Scientific Games and its massive debt load. But investors are willing to gamble on the stock right now and it doesn’t look all that expensive compared to gaming industry peers.
“What I like right now is that the company has consolidated so much of the power in lottery and gaming supply that it can slowly raise prices and expand margins.”
Scientific Games shares were unchanged Wednesday on the Nasdaq, closing at $53.70. Shares have risen 7.3 percent in 2018.
