Scientific Games posted a narrower loss and a jump in revenue in the first quarter, both of which topped Wall Street forecasts.
But the Las Vegas-based gaming equipment provider disappointed analysts Monday by not reporting the results of a strategic review of the company.
“With the growth segments Digital and Social revenues up 12% and 28% year-over-year, and the bulkier segments (Lottery and Gaming) performing better, we view this quarter as an important turning point for the company,” Macquarie Securities gaming analyst Chad Beynon told investors in a research note following Scientific Games’ earnings announcement.
“While we had anticipated a conclusion to the company’s strategic review, which began roughly eight months ago, management expects to deliver final results in the next three months,” Beynon said.
Union Gaming Group analyst John DeCree said investors “seemingly expected some specifics today” but Scientific Games officials said the company would have more to report down the road.
“We believe the outcome of the strategic review could unlock significant value for shareholders,” DeCree said.
Scientific Games said its net loss was $15 million, or 16 cents per diluted share, for the three months ended March 31, compared with a net loss of $159 million, or $1.69 per share, a year earlier. The latest per-share result topped the average 45-cents-per-share loss forecast by analysts polled by Seeking Alpha.
Revenue rose 0.5% $729 million from $725 million to top the $715.7 million forecast by Seeking Alpha-polled analysts. Earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, rose 35% to $270 million from $200 million.
Looking at first-quarter results by segment, Scientific Games’ lottery (up 17% to $248 million from $212 million) and digital revenue (up 11.7% to $86 million from $77 million) both rose from a year earlier, although gaming revenue dropped (down 23.3% to $244 million from $318 million.)
Scientific Games said launching business in Michigan and strength in Europe boosted digital division results and added that record U.S. instant game sales, large Powerball, and Mega Millions jackpots boosted the lottery revenue.
The company said deals with grocery giant Kroger Co., including one to put SCiQ InLane products in Kroger stores, will expand instant ticket distribution
In a conference call with analysts, Scientific Games CEO Barry Cottle expressed optimism about sports betting, saying his company deployed four sportsbooks in the U.S. in the quarter and launched in Michigan and Virginia.
After the first quarter ended, Cottle said, the company brought its U.S. total to 24 sportsbooks by launching in Indiana, Illinois, and Tennessee. Cottle said more rollouts are planned, citing recently enacted sports betting legislation in Maryland and Arizona, and legislative progress in New York and Florida.
Cottle said Scientific Games’ growth was built on 2020’s success and came even amid continued restrictions and closures, particularly in the United Kingdom and Europe. He added that his company is vigilantly watching its balance sheet, working to boost free cash flow and pay down $250 million in debt.
“We are executing on our strategies, building a strong foundation for our path forward,” Chief Financial Officer Mike Eklund said. “We are creating great content and leveraging it across the many platforms our players like to engage with, thus enhancing our returns. We are strengthening our balance sheet and are committed to meaningfully reducing leverage.”
Scientific Games shares fell almost 7% Monday on the Nasdaq after announcing earnings. On Tuesday, the shares closed at $55.95, up $3.82 or 7.33%
Scientific Games has surged 32% in 2021 and quadrupled from a year ago.
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